The value of the Internet of Things (IoT) to the insurance industry is becoming understood but there is plenty of room for even more innovation.
The roots of IoT applications in insurance lie in how telematics were used to support early blackbox insurance for younger drivers. Early applications of this technology were being talked about over a decade ago on the
BBC, for example.
Today, we are seeing IoT evolve as cars become more connected, smarter, and have more autonomous driving features. This is something I have talked about before in terms of how
Octo Telematics is pushing the boundaries of what can be done in using IoT derived data to transform the relationship between insurers and policyholders. Connected devices in a customer’s car present the capability
to spot and monitor risks, and to enable an insurer to offer super-tailored and personalised products and service. The same devices can also act as sensors to collect important data for claims management.
However, the potential role of IoT in insurance is so much more than just motor insurance. This is clear when you consider the sheer number of IoT devices in use. It has been predicted there will be 30 billion IoT devices with a global market value of $7.1
trillion by 2020. (Source:
IDC). These are impressive mega numbers, but what is really remarkable is to consider the
global IoT market by sub-sector.
For example, connected cars make up only seven percent of the global market compared to 26% for smart cities. This is not to underestimate the significance of IoT linked insurance for cars, as it is likely the level of smart connectivity in car manufacture
Proliferation of IoT that tracks driving behaviour and makes it easier to personalise car insurance coverage has the potential to generate new revenue streams.
McKinsey has talked about additional revenue of $1.5 trillion by 2030 from selling on-demand mobility and data-driven services.
A slice of this could go to insurers, some of whom are already identifying early opportunities. For example, Allianz provides insurance for
Drivy, the leading marketplace for car rentals in Europe. The service enables each user to rent a car from someone within walking distance of the renter’s home whenever needed—whether to go away for a weekend, attend a
business meeting, or organize a move. What is interesting is how vehicle owners can also rent out their own vehicles on Drivy.
Smart cars aside, the global IoT market share report highlights a range of groupings, dominated by cities, industry, and health.
A fifth of the IoT market today comprises connected health devices, which are typically wearables. These can be a very effective and non-invasive source of data for underwriting and risk assessment purposes. Connected wearables can gather metrics to assess
risk in less time than a full medical exam. They also offer insurers a consumer engagement opportunity, providing customer value beyond insurance protection.
Just as important, wearables can be a useful tool for preventing and mitigating workers’ compensation and general liability claims. A great example of this is
Kinetic’s Relfex, developed by a team of biomechanical engineers. This is a smart wearable that vibrates when an employee exhibits high-risk postures, such as lifting heavy objects incorrectly. Over time, workers can
use Reflex to improve their biomechanics, resulting in fewer injuries and improved well-being. The company claims that its technology can reduce unsafe postures by as much as 84%.
IoT devices are becoming familiar features in more homes and commercial buildings, providing another opportunity for insurers. Location-based sensors can reduce the risk of fire and theft, as well as collect valuable data when assessing a claim or managing
repairs. We are all familiar with how heat and motion sensors, plus cameras, could be helpful. There are also new IoT devices ideally suited to commercial buildings that insurers could be promoting to reduce the risk of property damage. For example, a UK firm
called Plumis has developed a smart connected sprinkler system. All activity is stored on a “blackbox” to help investigate a claim. When the system is not active, it engages a “dry pipe” approach so that they
are less susceptible to leaks and freezing pipe bursts.
Of course, any large-scale adoption of IoT technologies by insurers will require them to revamp significantly how they collect and analyse data.
A study from last year suggested most insurers were ill-prepared to do this even though they had acknowledged the importance of IoT. With the increasing use of data analytics by insurers, this hesitation over IoT data will probably change. And of course,
the extent to which Big Tech brands are populating homes and offices with an array of connected devices could also be a catalyst for insurers to pick up the IoT baton more forcefully.