Until recently, the Internet of Things (Io T) was on the strategic agenda of only the largest and most progressive insurers. The Io T was largely viewed as a futuristic concept, and many insurers adopted a wait and see attitude.
Such a posture is no longer viable. Early adopters have established a clear and compelling value proposition by demonstrating how data from in-home and automotive sensors,
wearable technology, drones,
GPS, mobile and telematics
devices, networked appliances,
and multiple other sources
can help grow new business,
improve risk assessment and
proactively engage policyholders in loss prevention.
The Io T offers truly disruptive and transformative potential to the insurance industry.
for insurers that can shape the
right strategy. The key compo-
K Processes, functions and areas where the Io T could have
the biggest business impact
K The biggest and most important risks to manage—data
security chief among them
K Best first steps for insurers seeking to operationalize and
ultimately monetize data from the Io T
The Io T: What it is, why it matters
The Internet of Things is the network or system of interrelated computing devices, sensors, living creatures or other
objects that have unique identifiers and can communicate with other devices on the network. These objects, or
“things,” are capable of transmitting data.
For insurers, the most impactful data streams and sources
from the Io T are likely to include:
K Wearable or personal technology, sometimes called “fit
tech,” often used in the context of monitoring heart rate,
steps walked, and other health-related metrics. This
technology is rapidly developing, with prototype patches
already performing blood work, ECGs, and automatically
administering drug doses.
K Sensors on objects, including personal and commercial
vehicles and shipping containers, that measure distances
traveled, speeds, and frequency and level of braking
K Location-based sensors, such as those in factories, warehouses or offices and in-home sensors, including “smart
thermostats,” security technologies, such as alarms and
cameras, and industrial control systems
K Other geographic information systems (GIS) that provide
geophysical, topographical, climatological, and hydrologi-
cal data, as well as information about utility grids and flight
path, and which may include drone and satellite imagery
While this data is directly accessible by or streams to
insurers via sensors or mobile devices, third-party orga-
nizations may also play a role in owning, aggregating, and
distributing to insurers. All of these data types are potentially
useful for the full range of products and lines of business,
from commercial (which was an early adopter and has been
an advanced user of such data for many years), to life, proper-
ty and casualty, and health.
The impact: today and tomorrow
The Io T’s impact within insurance is coming fully into
focus. At the highest level, better use of Io T and sensor data
means insurers have the opportunity to:
K Establish direct, unmediated customer relationships
based on direct access to objective and unfiltered data.
K Gain more granular and precise understanding of who
their customers are and how their needs change over time.
K Individualize offerings of products, features and access
For insurers that have relied on agents and brokers, the
ability to directly access objective and unfiltered customer data represents enormous change. Historically, much
customer data was unavailable, and the information insurers
could access was often subjective or inaccurate. Consider the
common misrepresentation of data around certain behaviors
(smoking, alcohol intake, regular exercise, miles driven per
week) on insurance applications. The Io T greatly expands the
universe of accessible data, opening up new possibilities in
Coupled with advanced analytics capabilities, new data
streams and sources have set the foundation for entirely new
business models. Usage-based insurance (UBI)—so-called
“pay-as-you-live” or “pay-as-you-drive” business models—have
The Internet of Things is helping insurance carriers in two important areas
that will determine their success in the coming years.
By Chris Lanzilotta