How IoT is Impacting the Insurance Industry

My first introduction to Internet-of-Things (IoT) was at a Salesforce conference in 2017, and I was very excited about the impact that it could have on our world. The last thing anyone wants is a jet engine to quit working when you are at 30,000 feet. What if that engine could “talk” to another system and constantly provide performance data so that if the performance started to get worse, a high-priority case or ticket could be created to fix the problem? “Wow, that is cool” was and still is my thought.

I have friends who own Tesla vehicles, and when they have a problem, they can request service via the Tesla app. Nothing fancy here, although the Tesla app is amazing! Prior to scheduling the appointment, Tesla can look at the diagnostic information to determine the best course of action to take on the vehicle. Because each Tesla vehicle has an LTE signal, it constantly uploads performance data to Tesla, and this information can also help with the management of warranties. But how can IoT impact the insurance industry?

Ways IoT Can Help The Insurance Industry

IoT can help insurers reduce costs and generate additional revenue related to the insurance industry. Here are some examples where IoT can help:

• Getting data on driver behavior like how fast they drive or how often can better help assess risk
• IoT devices give insurers an introduction to each policyholder. Since each policyholder typically works with an agent, these devices give insurers more information about each policyholder so they can establish better customer interactions and more targeted communication.
• Allow insurers to notify policyholders when something like a heater, boiler, or water tank is about to experience a major problem.
• Have smoke detectors notify the fire department when homeowners are not home.
• Dispatching an ambulance based on an accident and having the IoT device provide the first notice of loss (FNOL).
• Provide insurers with a new revenue stream. As IoT devices provide information back about vehicle performance and service needs (don’t you hate when that wrench icon lights up on your dashboard!), insurers can proactively cross-sell services.

While the automotive use case for IoT is more mature than other industries, let’s look at how IoT can be used for homeowner insurance. When asked by my insurance agent, I said that I had a home security system, which was 100% true. They did not ask if it was a working system or whether I was paying for the service (which I wasn’t). Now I am a proud user of the Ring doorbell and two Ring motion detector spotlights outside my house. I subscribe annually to Ring so that all videos are stored in the cloud so that I can access them if needed. Regarding the HVAC at my house, I have the Google Nest and love the ability to update the temperature from my phone. However, my insurer has not asked to be able to monitor those devices to either proactively notify me of a problem or use the data to reduce my premium hopefully. My insurer should be recommending products and services (cross-selling) that can reduce my premiums (win/win), but that has not happened. Having my insurer monitor my devices gets into a whole new issue around data privacy.

With our aging population, many people want to continue living in their own homes instead of a healthcare facility. Being connected via IoT and other devices is necessary to provide better home healthcare. When I think back to the Life Call commercial where their slogan was “I’ve fallen, and I can’t get up,” IoT can take this communication device to the next level. For example, third-party devices like watches or bracelets can share data with a smartphone. Then based on the analysis of the data, the smartphone can take the appropriate action (call the ambulance, have your doctor’s office call to schedule an appointment, etc.). Interestingly, the older population is more open to having these devices be accessible by third parties instead of people who don’t need home healthcare.

Unfortunately, when looking at commercial insurance, cybersecurity is a growing market. It is astounding how many attacks happen daily, and those insurers that offer this coverage need a way to minimize the risk. By leveraging the IoT devices on the hardware, they can take this data and quickly alert their clients if they spot any potential issues. In this case, the policyholder is more than happy to provide access to the diagnostic information.

IoT Challenges for the Insurance Industry

While I am sure that consumers will finally embrace IoT, some issues need to be dealt with, such as:

• Data Privacy – What if one of my devices captures something that the policyholder doesn’t want it to (i.e., I am going 78 MPH in a 65)?
• Security – What would happen if someone hacked into my Ring system (for example)?
• Retraining – With AI not being mainstream, insurers will require massive investment in their people.
• Infrastructure – With these IoT devices providing data on a regular basis, insurers will need to store many terabytes of data, with the data growing significantly over time.

The bottom line is that IoT is here to stay, and while we may only be at the beginning of the journey, it will be well adopted over time and become a standard part of our lives. If/when it gets positioned as a tool to save the policyholder money, you will see adoption grow. Tell us your take on IoT. Have other questions? Sikich is here to help. Let’s talk.