IoT and the future of Insurance Industry

IoT was just a futuristic idea a few years ago. It is now a fast-growing network of sensors and connected devices generating large amounts of usable data. Early adaptors are reaping a rich dividend from the real-time data they have access too. According to research by Accenture, the insurance industry is poised to realize immense value from IoT. Insurance business depends heavily on having detailed data to assess risk. Historically, this information was limited to what applicants could enter on a form. But now, IoT offers access to a diverse spectrum of intimate data, allowing insurers to better understand risk and price their policies. This is also helping insurers advice clients on how to manage risk during a policy year.

Many areas are being discussed as practical application areas for IoT in insurance. This includes:

Sensors on machines: This helps get active data from vehicles both personal and commercial opening up new venues in fleet management and industrial equipment maintenance.

Environmental sensors: This includes smart thermostats and industrial control systems. They are being used to monitor crop health and in large format, retail to reduce the risk for store owners.

Biometric sensors: Also called wearables, they are helping individuals monitor their health better. This is helping improve health care and reduce the risk for insurers

Geographical information systems: this type of solutions help understand risk related to weather events and seasonality for industries such as shipping

The impact of IoT is simple, it helps insurers improve predictive models when it comes to assessing risk, pricing policies and estimating necessary reserves. This was traditionally done through backward-looking claims data. Old data is not really helpful in modeling future risk; thus, the cost of insurance was high for the insured. Which almost always means loss of opportunity for the insurer.

Data coming from new IoT applications helps as it is real time. By identifying and presenting sensor-based solutions that improve overall operations for insureds, insurers can play a pivotal role in reducing the total cost of risk. This way they can design new solutions where risk and coverage are better understood by both the insured and the insurer.

The way forward

The insurance industry has a long way to go when it comes to leveraging the benefits of IoT. An IoT based strategy will require investing anew in technology, hiring new dynamic talent, and perhaps even transforming the corporate culture to better foster the sort of creative, methodical thinking required to prioritize which kind of data to gather and how best to use it. The ball has started rolling and before we know it the insurance industry will see disruption. 

A really good reverence to understand how the future is going to be from the IoT perspective is given in the book called The Future of IoT

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