The Insurance Sector Meets the IoT

The insurance sector isn’t renowned for being an early adopter of leading-edge tech.  

But one way or another, it is set to benefit hugely from the Internet of Things.

The insurance sector is a famously conservative one, disinclined to actively embrace change.  The coming-of-age of the Internet of Things is however one thing the sector would be wise to sit up and take notice of.

One of the reasons is purely commercial – cynics might in fact say mercenary.  An explosion in interconnectivity means more personal data in transit, which means more potential vulnerabilities, which means more potential for cyber-crime … which means some organisations need to make sure they have adequate and up-to-date insurance cover.

But I don’t mean to sound flippant.  Of much more interest to insurers is the universe of possibilities about to come onstream.  What the IoT means in practice is nothing less than an exponential increase (in volume, variety and velocity) of accessible data.  A recent Forbes blog quite succinctly summed up some of the potential the IoT offers insurance:

“Data from connected devices allows insurers to know their customers on a deeper level with more accurate personal information, which can help create powerful bonds and add an element of customization to insurance that has long been lacking. Insurers can also more easily detect fraud, recommend personalized products, and create more accurate estimates.”

The IoT offers the sector a chance to be genuinely disruptive and embrace digitalisation and personalisation in the way its customers are coming to expect from the closely related fields of retail and banking.  Having direct access to unmediated data will give insurers a much more granular and accurate view of their customers, as well as a much more up-to-date picture of when and how their needs change.  This should allow them to develop new ranges of products, services and offers which are genuinely relevant to the current needs of their customers.

The pools of potential

I’d like to suggest some examples of what the IoT impacting on insurance looks like, today and tomorrow.

Sensor technology in the home.  We’re already familiar with smart lights, thermostats and meters; the near-future will see a proliferation of connected devices which will monitor safety and security.

Sensor technology in the workplace. Primarily security technologies including alarms, cameras, and safety monitors, but also industrial control systems.

Personal technologymonitoring health metrics such as heart rate, blood pressure, number of steps walked per day and so forth is invaluable to insurers.

Automotive sensors can include advanced monitoring of such things as speeds, and distance travelled in a measurable time period, but also identifying ‘safe’ and ‘unsafe’ driving. 

Sensors on objects in transit can include commercial shipping containers and even individual items.

Geographic information systems (GIS)provide geophysical and climatological data which may inform long-term estimates about expected crop yields, or short-term warnings about potential hurricane damage.

Utility grids give near real-time information about how energy and other resources are being utilised across - potentially - vast areas.

It’s not necessarily the case that all of this is new.  Many vehicle fleets have had monitoring and tracking devices for decades, and industrial manufacturing floors are very familiar with connected control systems. But the joined-up, immersively pervasive nature of it and the expectations that this now places on workers and customers, is driving new innovation and opportunity.

Underwriting new paradigms

One of the much-sold benefits of the IoT is nothing less than moving organisations and individuals forward in the direction of active loss prevention.  The recent Forbes blog again:

“Most insurers believe that connected devices and more data will prevent greater losses, which could decrease the number of claims and lower insurance prices for customers who have reduced risks.”

The underwriting function has the potential to be hugely changed for the better (and by which I partly mean, it’s about to get far more interesting) by the IoT.  Underwriters will be able to combine data sets to hugely improve modelling.  As well as sorting out the right cover at the right time, underwriters may over time find themselves as repositories for all sorts of other information on their customers – not least seeing how new “fit tech” changes mortality and morbidity risks.

As well as new vistas of insight for underwriters, the accelerating maturity of the IoT will also occasion a rise in third party organisations owning, aggregating, and distributing data to insurers.

Driving innovation

It’s an interesting time for the insurance sector.  Forward thinking, disruptive businesses such as RDT are committed to pushing the envelope and driving innovation in insurance – RDT having recently launched their Trice app which allows customers to purchase their insurance on demand, as and when they need it, to the day and to the hour.  The IoT will increasingly come to play an integral part in managing these offerings.

Inevitably, new technology comes with new complexities and complications.  The IoT isn’t immune from potential for misuse and new innovations in fraud, which means new risks for customers. Which was pretty much where I came in, with my somewhat sly suggestion that some tech early adopters are going to have to be confident they have their insurance covered.

But this isn’t a time for irony.  I’m convinced that the IoT offers a huge – I’d go so far as to say unprecedented- opportunity for the insurance sector to engage with its customers in a direct, unmediated way to identify what it is (in terms of products, services and innovations) customers would be interested in from insurers in exchange for a much more intimate access to their very personal data.