Data from Internet of Things-related (IoT) devices is a potential boon to insurers, giving them new options for covering existing and new risks alike, according to a new report published by The Geneva Association.
IoT devices include objects embedded with software and sensors, among other technologies. Those devices, in turn, connect with other devices and systems on the Internet, and data exchange is typically part of the process. This kind of technology is in everything from health monitoring devices to autonomous vehicles and telematics tech.
“IoT allows risks to be better managed. This can be seen as the very essence of the evolution from pure risk transfer to a ‘prescribe and prevent’ scenario,” notes the study by authors Isabelle Flückiger, Director New Technologies and Data at The Geneva Association, and Matteo Carbone, Founder and Director, IoT Insurance Observatory.
The direct use of IOT-related technology can offer real-time risk mitigation, according to the study. One way this can happen is through automated actions such as autonomous driving systems in cars—something that can reduce risk without any human intervention. Another way IoT can work is as a warning that triggers human intervention, such as a water leakage alert that activates an emergency repair system, the study found.
IoT technology can help reduce risk by triggering detections of: missed safety tasks involving preventative maintenance, alerts about risky situations such as frozen pipes or spilled liquids, or the consequences of an event that already happened, such as an unsafe worksite or injury.
IoT, Commercial Lines and Personal Auto
According to the study, IoT technology could easily fit in commercial lines, which focuses heavily on real-time risk prevention.
“Real-time risk prevention is most mature in commercial lines, driven by the loss control culture present in commercial insurance,” the study determined. “Field inspections by engineering teams are well established and enhancing this work with new technologies seems like a natural step.”
Personal auto insurers could also stand to gain from more IoT technology, according to the study, after some early integration successes.
“A few personal auto insurers around the world have integrated real-time warnings in their telematics programs,” the study said. “This live feedback—from lane departure warnings to alerts about upcoming risky intersections—influences driving behavior and allows insurers to reduce expected losses.”
The study notes that water leakage sensors could play a big role in home insurance but said that demand is not yet significant.
“Water leakage sensors are one of the most cited preventative services in home insurance. However, as of today, insurers have struggled to introduce approaches that generate substantial demand and a sustainable business case,” the study found. “Finding a sustainable business case in the smart home insurance market is challenging, but ongoing innovations should make homeowners the ultimate winners.”
On the other hand, bundling IoT-related risk preventing services with customer services such as security has had a lot more traction early-on, according to the study authors.
“The sustainable business case is built on a bundle of different services—some sold after the purchase—and on the reduced churn rates built through customer engagement.”
The full report from The Geneva Association is “From Risk Transfer to Risk Prevention: How the Internet of Things is reshaping business models in insurance.”
Source: The Geneva Association