The insurance industry has always tried to assess risk: how likely is it that something bad will happen? This assessment is based on a number of demographic and other factors that help insurers decide how much risk is involved, and how much premiums will cost. With the evolution of the Internet of Things (IoT), however, insurers have the opportunity to assess risk at a more granular level, opening the way to a new class of products and services that take the data produced by IoT devices into account. The Internet of Things and insurance work together to provide a better customer experience.
For example, Vik Renjen, SVP Sutherland Global Services, predicts that auto insurers will offer “usage-based insurance.” This takes into account “history of speed, distance, turning and braking patterns, time of day and much more from the vehicles of prospective policy owners.” (Reiss, 2016) When insurers take a look at the actual driving patterns of the people they insure, then the best drivers will receive the best prices on their insurance.
IoT devices can also help alert property owners to events such as fires or water leaks, which can prevent more damage and larger insurance payouts. (Makhluf, 2017) These environmental monitoring systems are inexpensive to install, and alerts can be received through a smartphone. In addition to alerting property owners, IoT systems can also be created to mitigate the problem. For example, a water leak might cause the water valve to be turned off. By using these systems, greater damage and expense can be avoided, which makes these systems a great benefit to insurance companies and property owners alike.
Finally, wearable devices can be used to encourage healthy behaviors and reduce health insurance costs. Insurance company John Hancock, for example, distributed free Fitbits to its customers. This encouraged healthy behaviors, which meant that customers were less likely to file a costly insurance claim. (Drinkwater, 2016) Additionally, wearable health devices help patients and their physicians identify health issues early when they can be treated for less expense, rather than waiting for more serious conditions to develop.
The Internet of Things and insurance is a game-changer, and will only continue to help insurance companies gain insight into the behaviors and risks presented by their customers. This will result in premiums that are better matched to customers, and lower risk for the industry.
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Drinkwater, D. (2016, May 24). 10 Real-Life Examples of IoT in Insurance. Internet of Business.
Makhluf, J. (2017, Sep 5). How IoT is inviting insurers into smart homes. Property Casualty 360.
Reiss, R. (2016, Feb 1). 5 Ways the IoT Will Transform the Insurance Industry. Forbes.
Thanks for sharing this info. So much has come together so far. Usage Based Insurance is being used by so many major insurance companies at this time. It’ll be interesting to see what impact that has on future rates.