There is plenty of excitement about what the Internet of Things
can do for insurance carriers, but Donald Light, director,
Americas property/casualty practice for Celent, warns that the
industry is not ready to put much money into Io T investments.
“I think the key phrase is an attitude of watchful waiting in
that, with one notable exception—telematics for private and
commercial auto—insurers don’t see where they can make
investments in the Io T now or even this year,” says Light.
Light feels some might argue with the inclusion of telematics
as part of Io T, but he maintains it qualifies under any definition.
What differentiates telematics is the number of data sources.
“The Internet of Things needs to have sensors that are net-
worked and generate new kinds of data that insurance companies
can analyze to determine some interesting and important things,
including the potential for loss and preventing loss,” says Light.
“It all starts with network sensors attached to things or people.
Except for telematics, that’s in a primitive state in insurance.”
Insurers need data from enough sources and an adequate
set of loss data to decide how to get value from it all, according
to Light. He explains that he could install a new thermostat in
his house, but if not enough homeowners do the same thing it
doesn’t do an insurance company any good.
“You need a significant number of devices that put out data,”
he says. “Who’s going to collect the data? Should insurers give
away network sensors? Some offer things such as moisture
detection in the home, but beyond that who is going to take the
first step: sensor providers or insurance companies?”
The problem midtier and small insurers face is they may not
have adequate internal research and development capabilities
to conduct a pilot, points out Light. They may have to buy or
subsidize the devices plus determine a way to accumulate the data,
analyze it, and make some type of decision based on that data.
“I don’t know if they will leap into the fray this year, howev-
er the more interesting and exciting prospect is that definitely
by 2016 in Q4 telematics is going to leave the R&D stage among
big insurers—with Progressive already the exception—and start
rolling out to a sizeable portion of their book of business,” says
Light. “Whenever that happens, anyone writing auto insurance
is going to have to get in line and do the same thing. If they
Light believes commercial property insurers will be the first
to take advantage of the Io T. He points out there already are
systems in place that are networked in commercial buildings,
Don’t Get Ahead of Yourself
CIOs don’t see an investment priority in the Internet of Things because they
don’t yet know where to spend their money.
By Robert Regis Hyle
In general how does C-suite management
view the Internet of Things? By insurer size
K C-suite Management - It is too early to tell
K C-suite Management - Will have limited impact on our business
K C-suite Management - Will have some impact on our business
K C-suite Management - Will be one important factor among several others
K C-suite Management - Will substantially change how we do business
Source: Celent CIO Survey
28% 33% 25%
Large Midsize Small
such as HVAC, security, and fire-suppression systems.
“The issue is finding someone to get that data in a form that
is useful for insurance companies because it wasn’t designed to
be useful to insurers,” says Light.
Most commercial properties have security cameras in place
and those cameras monitor spaces inside and outside the property, points out Light.
“That’s a lot of unstructured data,” he says. “To my knowl-
edge, no insurance company or data aggregator says they have
a building-security score based on live camera feeds. That’s the
kind of thing insurance companies need in order to change
pricing, underwriting, and possibly claims adjusting.”
Data from sensors usually falls under the heading of Big
Data and Light believes there is another overlap. “How many
insurers have good capabilities for acquiring, storing, analyzing,
and acting upon Big Data?” he asks. “The answer is it’s a very
mixed picture, but I think the Io T is going to push them, at least
in some cases, in that direction.” ITA