The coming IoT revolution: a 6-point plan for life insurers

"In the coming era of connected technology through the IoT, insurers must begin to make strategic decisions about their futures," the report adds. "These decisions will involve devising short-, medium- and long-term plans to streamline, enhance and transform the business."

Before spelling these out, the Capgemini authors assess customer satisfaction with insurers. On this count, the report offers both good and bad news.

On the plus side, "customer experience levels" rose worldwide. Globally, Capgemini's customer experience index (CEI) score, measured on a scale of 0 to 100 (100 being the highest and 0 the worst) edged up 6.1 points to 73.9.

By region, North America recorded the highest CEI score in 2015 among the five regions surveyed:

• North America (77.4 in 2015 vs. 72.6 in 2014)

• Europe (73.9 in 2015 vs. 67.6 in 2014)

• Latin America (73.4 in 2015 vs. 68.3 in 2014)

• Developed Asia-Pacific (72.8 in 2015 vs. 66.2 in 2014)

• Developing Asia-Pacific (72.7 in 2015 vs. 67.0 in 2014)

On the negative ledger, millennials or Gen Yers (those born 1981-2000) reported lower customer experience levels than did those in older age brackets. Why the disconnect between the younger generation and insurer's broader global customer base?

The report flags millennials' higher expectations. Being more tech-savvy and digitally connected than Gen Xers and boomers, Gen Yers "embrace" all channels (social media, mobile web, desktop web, etc.) and have a "higher tendency" to interact with insurers through these channels. The time they spend on social media is also much greater (2.5 times more) than on the Internet mobile channel.

Globally, just 33.9 of millennial customers recorded "positive" experiences in 2015. That's more than a 21.5-point difference relative to everyone else polled (55.4 percent.). By region, Capgemini found similarly large disparities between millennials and those in older age brackets reporting a positive experience:

• North America (39.6 percent of millennials vs. 63.8 percent others)

• Europe (33.3 percent vs. 56.6 percent, respectively)

• Latin America (33.2 percent vs. 56.5 percent)

• Developed Asia-Pacific (33.2 percent vs. 50.5 percent)

• Developing Asia-Pacific (34.8 percent vs. 45.0 percent)

Which channels are global customers using to purchase and renew insurance policies?

While digital channels are gaining ground, the predominant one remains the traditional agent channel. Among the millennials surveyed, 37.1 bought a policy via an insurance agent. And nearly one-third (32.2 percent) will "likely" purchase or renew a policy through an agent in the next 12 months.

Among older age groups, use of the agent channel is even more pronounced: 43.6 percent purchased a policy through an agent. And 37.6 percent are likely to interact with an agent to buy or renew in the next 12 months.

Over the next year, desktop webrowsing is likely to remain the favored channel for purchases and renewals among both groups (22.5 percent of Gen Yers vs. 25.3 percent others). Other channels — phone, bank and broker — are also the more likely avenues for purchases/renewals than mobile Internet and social media. Less than 5 percent of both millennials and non-millennials expect to use these channels in the next 12 months.

Turning to the Internet of Things, Capgemini believes that three IoT technologies — connected ecosystems (such as thermostat-activated interior lights), embedded technology (e.g., wearable devices like the Fitbit) and machine intelligence (think driverless cars, drones and robots) — will have the most profound impact on consumer behavior.

These technologies also present risks and opportunities for insurers: The carriers, the report notes, will have to become proficient in "data management" and "analysis" if they're to keep pace with rapidly evolving customer needs and preferences.

That said, the survey identifies differences between insurers and consumers as to the rapidity with which the technologies will be adopted. For example, 23.1 percent of consumers say they will use driverless cars. This contrasts with the 16.3 percent of insurers that believe so.

Conversely, nearly half of insurers (48.9 percent) believe that consumers will adopt wearables. That's significantly more than the 30.1 percent of customers who think they will.

Not surprisingly, affluent consumers — both millennials and non-Gen Yers with $250,000-plus in assets — are more likely to say they plan use the new technologies than those who are not affluent. Among Gen Y, roughly half of affluent customers plan to adopt:

• smart ecosystems (53.2 percent)

• wearables (54.7 percent) and

• driverless cars (46.4 percent)

The percentages are nearly as high among Gen Xers (those born between 1964 and 1981):

• smart ecosystems (49.8 percent)

• wearables (47.5 percent) and

• driverless cars (35.1 percent).

As consumers adopt these solutions, insurers will need to retool their operations. Among other changes, the report advocates the following:

1. Streamlining the business: For example, by adopting digital technologies to more efficiently sell policies, manage accounts and track claims; and by consolidating systems to achieve synergies, reduce costs and prepare for global expansion.

2. Building capabilities in data and insights: Becoming data-centric will entail, among other changes, improving customer analysis and segmentation capabilities, the aim being to develop personalized insurance products. Such tailoring will also require that insurers become proficient in collecting data from external sensor devices.

3. Improving value propositions and services: To this end, the report notes, insurers should partner with other firms to develop value-added products (such a smart-home system to warn customers of an impending washing machine problem, thereby reducing the risk of water-induced property damage).