Design Engineering
Showcase

New Home Insurance Business Models Through IoT

Student
Michael Hofmann
Course
Design Engineering MEng
Supervisor
Dr Eva-Maria Kirchberger
Theme
Embracing the White Space

This project explores how the Internet of Things (IoT) can change home insurance business models. This project highlights how insurers can expand their value proposition to provide a holistic property management solution, shifting from being reactive to proactive. The data gathered through smart devices leads to a substantial increase in touchpoints of insureds, enabling the process of risk selection and underwriting to be dramatically improved. To enable the new value proposition, insurers must change the operating aspects of their business model to participate with other types of firms as part of a home ecosystem.

Service Proposition

Insurers have the opportunity to expand their offering to provide an all-round property management service. This allows them to ultimately reduce risks and therefore reduce losses and claims, truly allowing customers to live life in comfort.

 — New Home Insurance Business Models Through IoT
Home health dashboard & tracking enabled through IoT.
 — New Home Insurance Business Models Through IoT
Transparent and fast tracking of issues reported in the home.
 — New Home Insurance Business Models Through IoT
Integrated network of support partners using chatbots for an empathetic and fast end-to-end service.

Business Model

Value Proposition: A Proactive Personalised Risk Manager

  • Insurers can shift from reaction to prevention to support customers as a personalised risk manager.
  • Real-time monitoring through IoT can reduce hazards and automate the first notification of loss. This can reduce the chance of loss but also the degree of risk.
  • Insurers have the opportunity to transition from a payer to a partner, by also providing a broad range of maintenance and recovery support services, as part of an enhanced property management offering.
  • The new value proposition is driven by customer values of prioritising speed, being available on-demand, delivered with transparency and empathy.

 — New Home Insurance Business Models Through IoT
Value Proposition: A Proactive Personalised Risk Manager.

Operating Model: Artificial Intelligence-Driven Underwriting

  • Real-time monitoring through new customer touchpoints leads to a substantial increase in data points on insureds.
  • Enhanced data can improve underwriting models through the reduction in asymmetric information.
  • This allows for smaller risk pools with improved loss ratios. Artificial Intelligence will need to be used to drive the new underwriting models, given the volume of data.
 — New Home Insurance Business Models Through IoT
Operating Model: Artificial Intelligence-Driven Underwriting Business

Operating Model: Partners Outside the Industry in the Home Ecosystem

  • To deliver the new value proposition, insurers will need to operate and share data as a part of an ecosystem.
  • The customer is at the centre of the ecosystem and value is delivered through a network of partners.
  • Insurers have a choice if they want to be an ecosystem orchestrator, convener or service provider. As an orchestrator, they would have control over the customer relationship and data. As a convener, they work in close partnership with a subgroup of the ecosystem. As a service provider, they act invisibly supporting another ecosystem player to provide Insurance to customers as an ancillary offering.
 — New Home Insurance Business Models Through IoT
Operating Model: Partners outside the industry in the home ecosystem.

Process

A design-led process was used throughout the project, considering business, technical and customer requirements in parallel. Tools used included:

  • Literature Review;
  • IoT Pretotyping;
  • Morphological Analysis;
  • Expert Interviews at Lloyds of London;
  • Attending the Global InsurTech Summit;
  • Interviews with customers and generative design game;
  • Iterative UX prototyping using Atomic Design Principals;
  • Service Blueprints;
  • Kano Model Feature Validation.
 — New Home Insurance Business Models Through IoT
Generative Research Study, one of many design-led techniques used during the project.

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