What does 'the internet of everything' mean for insurers?

Today’s Insurance market is anything but boring for many reasons (to be expounded upon in later posts), but not least because of the arrival in the world of the 3rd Platform of IT which includes the “internet of things”. Billions of sensored things connected to the internet.

We are increasingly seeing more ‘high-value’ things having the capability to ‘log-on’. Cars, buildings, washing machines, fridges, even clothes now have their own IP addresses and processing powers, allowing them the ability to communicate their status to others on the internet. These connected objects of value have something in common with unconnected objects of value – loss or damage to them causes the owner financial hardship. This is where insurance comes in. For example, cars fitted with telematics devices can alert insurers on how the vehicle is being operated in real-time. Not only does this allow insurers to understand their risk positions in real time but it also enables them to offer new and deeper relationships, insight and value to their customers.

By thinking strategically (and some definitely are) Insurers are well placed to actually be at the centre of the internet of everything, and reap the benefits. Usage based auto insurance is starting to take off, but it’s just the beginning. It won’t be too long until smart actuaries and underwriters apply the usage-based or context-based insurance concept to other things of value that are connected. What real-time characteristics can smart buildings provide to insurers so that they can provide differentiated pricing and product features? What about policyholders who are participating in the quantified-self movement? Answer: usage-based health insurance. “Demonstrate to us that you are living a healthy and active lifestyle by providing us with your FIT bracelet data, and we’ll give you a discount on your health insurance premium”. If insurers aren’t actively thinking about the unique opportunity presented by the Internet of Everything, to know risk better and develop deeper customer relationships, we bet others are.