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The Internet of Things from both sides of the insurance looking glass

  • Posted on July 25, 2016

Insurance

The Internet of Things (IoT) as applied to the insurance industry is starting to carve out three natural grooves in terms of use cases:

  • Automotive telematics
  • Home / facility / equipment monitoring
  • Health maintenance

There are other very interesting cases emerging like combining IoT and smart contracts for ‘wire-level’ cyber security coverage, but in today’s market, the big three seem to be what most people are talking about, and actually piloting with insurance policies.

The technology has made it possible to gather geographically distributed sensor data in near real-time and processes it all at a cost that is ridiculously lower than could even be imagined 10 years ago.  As an insurance carrier, who wouldn’t want access to this rich, highly contextual trove of information at fractions of a penny per data point?  It is a cache so rich, you would practically have to be jinxed not to find value in it.

Seems like a fantastic thing.  Great, but at the same time the insured are being asked to hand over unprecedented levels of detail heretofore held as (mostly) private to a carrier who is still trying to figure out. For example, if drivers who like to corner hard and brake fast actually correlate to a greater or lesser risk for them. Without understanding the intrinsic value of the data we’re asking our customers to part with, skepticism will remain.

Looking at this from the opposite perspective, what if each insured collected their own telematics data and chose which information to present to a carrier as evidence to negotiate the best price for coverage.  In this scenario, the customer decides what data points to expose, to whom, and for what return value.  For those aware of what is happening with distributed ledger technology (i.e. Blockchain), this model may sound familiar.

IoT may evolve along traditional carrier-centric lines or in a digital, customer-centric way, or somewhere in between.  Either way, insurance carriers should give serious thought to new technologies from both perspectives.  We may find there is greater uptake and willingness on the part of the consumer if they are a partner in the process.

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