The growth of the Internet of Things (IoT) is a relevant trend for our hyper-connected society. A few years ago it was estimated that on a normal day, 127 new devices were connecting to the Internet each second. Nowadays, this trend is growing exponentially. Insurers cannot stop this. They can only leverage the data that comes from these connected devices or ignore this data.

Executive Summary

By selling IoT-based services to small commercial insureds and gaining their permission to use IoT data for core insurance activities, carriers will derive value on their bottom lines, believes Matteo Carbone, founder of the IoT Insurance Observatory. Using the analogy of telematics in personal lines, he shows that global insurance telematics best practices fuel loss control benefits, changes in behavior and risk self-selection effects that can improve insurer profit margins.

As of today, the insurance sector has exploited IoT data more on the personal lines side of the business than in commercial lines. Insurance telematics in personal auto has been out there for more than 15 years. The Italian market has achieved more than 22 percent telematics penetration in the auto insurance business. Penetration in the U.S. personal auto insurance market is still low, but in the last two years the market has evolved significantly. French insurers have built a success story on smart home insurance (télésurveillanceservices) over the same period, and even in the United States experimentation is progressing, with players such as American Family leading the pack.

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