The Internet of Things (IoT) is a collective of multiple technologies (sound, light, touch, temperature, motion, response, etc.) that work together to solve problems in many sectors. From automotive assistance to home comforts to industrial processes, IoT is helping and challenging our clients, carriers and agents. A new ACT IoT Deep Dive" is available from the Changing Nature of Risk Work Group, offering direction for agents on various types of IoT and their implications for you as an agent. ACT News is presenting some of the key pieces of the report here for you, but the document is rich in specifics on the types of IoT, so go to the IoT Deep Dive for full details.
Definition of IoT
The internet of things (IoT) is very broad in scope and very pervasive in its nature. It isn't about any one technology but the combining of technologies to provide information and access and to solve problems, which will eventually result in a connected world that few have imagined. Over time, it will not only transform the insurance industry but will also have a profound impact on many aspects of our society, including governments, businesses, and our personal lives.
From Gartner: The internet of things (IoT) is the network of physical objects that contain embedded technology to communicate and sense or interact with their internal states or the external environment.
Examples of physical objects that communicate in these ways are Alexa, Google Home, smart thermostats such as Nest and others, smart door locks, and Trackr or Tile keychain locators.
In the simplest terms, the IoT is a connected system of interrelated devices, mechanical and digital machines, objects, animals/pets or people that have the ability to communicate, sense or interact without human-to-human or human-to-computer interaction. There are already billions of IoT devices across our planet.
Insurance Implications/Impacts
Personal Insurance Impacts
As the result of IoT, carriers now can gather substantial amounts of data on potential customers, allowing them to underwrite more effectively. Information available via social networking and crowdsourcing means carriers can underwrite for lifestyle, while sensing devices, such as those for autos or home appliances, allow them to see how you drive or even what maintenance has been done on your dishwasher. With public source and authorized private information, carriers can get values on property or driving records without requiring many questions be asked directly of the consumer.
The consumer experience will change as well. Clients may be asked to give agents access to digital personal information instead of having to fill out a lengthy insurance application. Agents will need to adjust their processes of collecting information and understanding what additional information will be needed in the new environment.
Sensing device and social media data may have premium, deductible or coverage impacts. Where this information is stored and how it is collected will present a challenge as more of these items find their way into the underwriting process. But agents should be able to leverage investments in technology to gain preferred underwriting decisions.
Carriers will hope for a reduction in claims and better underwriting results. Our distribution channel will see more self-directed claims on smaller events to expedite and reduce expenses. Technologies exist today and are being offered to allow the consumer to communicate directly with adjusters, who can simultaneously zoom in on specific areas and measure all at once.
There should not be a great deal of change for agents on claims. One aspect that will be easier and should be recommended is home inventory pictures/videos. Since these can now be easily stored in the cloud, there is little chance of losing them in a catastrophic event. Agents need to be more aggressive in encouraging their customers to complete a thorough home inventory.
Overall, agents will need to be much more proactively engaged with customers to advise them in advance how these processes will work so that customers will not feel abandoned. The value-added benefit of independent agents is going to be redefined over time with these enhancements, and consumers are likely to stick with agents who not only take advantage of the technology enhancements for efficiency but also maintain/improve the degree of humanity in the claims process.
The consumer will notice a distinct improvement in the claims process with the ability to process their own small claims and have them paid more quickly. Catastrophic events are also being handled more speedily and efficiently as a result of the data-inventory buildup and access to more information.
So what does this all really mean? A quick example to illustrate:
A couple is looking for new insurance, and everything looks pretty good until a speeding ticket shows up on one of the drivers' licenses. The carrier's systems check that date across all their data. What they find allows them to still offer the most preferred rate. They see that the customer's water flow monitors reported moisture that day.
In addition, they see a post on one of their Facebook feeds that reads: Had a bad day. First, our water flow sensor went off. While on my way home to check on the house, my daughter's school called. She had hurt her leg at recess, and they feared it was broken. Change of plans, and on my way to pick her up, I got my very first speeding ticket. Behind every dark cloud though my daughter only sprained her ankle, and our flow shutoff valve worked perfectly. We had just a little water in the laundry room.
None of this should be a surprise when thinking about where we have come from. We now have mobile devices that connect us to a universe of data and information. The uses will continue to grow and change more quickly than in the past. Here are some of the IoT applications now in use:
Home monitoring and management: environmental controls, safety (cameras, motion sensors, smoke and water leak detectors, etc.)
Social media monitoring: to understand lifestyle and life events
Self-handling claims tools: allowing the consumer to communicate, measure and photo/video their own losses to speed up payment and repair
Sensing devices: both on auto and home to reduce claims and be efficient
Vehicles: navigation, sensors (both partially and fully autonomous), reducing frequency and severity of accidents, though repair costs are increasing in the short term due to high repair/replacement cost of sensor technology after accidents.
Commercial Insurance Impacts
The impacts of IoT on commercial insurance can be as varied as the many types of businesses that purchase commercial insurance. All businesses, including insurance carriers and agents, should benefit in three broad categories. These include improvement in internal operations and productivity, new opportunities for bringing value to customers, and potential new business models and sources of revenue.
As agents and brokers, the need to understand your client's risk or exposure to loss has never been greater or more challenging. New IoT technology offers many ways to reduce exposures and provide new opportunities to improve safety and loss control, but it may also introduce new risk for your client. How secure are the IoT devices used by your client, and have you discussed potential cyber risk? Does your client manufacture, sell or distribute IoT devices? IoT technology is rapidly evolving, and regulations concerning the protection of the data gathered by these devices are growing.
Can consumers of commercial insurance leverage IoT devices to improve operational efficiency or reduce the exposure to risk or the possibility of a claim? Do insurance carriers or brokers offer loss control services specifically designed to help maximize operational efficiency while reducing the exposure to new risk?
An increasing number of consumers and businesses are using technology routinely in the normal course of a day, and they expect their insurance carriers to do the same. Using technology to facilitate the claims process and make the entire process easier, as well as more efficient, is good for all involved.
IoT technology should reduce claims, but processing and paying claims will always be a core service provided by the carrier. How can carriers use IoT to improve the customer experience? Could sensors directly notify the carrier of loss? Technology is evolving rapidly. How can it be used to keep clients happy and increase retention of business?
As representatives of the carrier and the consumer, agents and brokers will need to understand the ramifications of self-service claims, communication issues with the appraisers, and the technology being used to service these claims. There will also be additional remote servicing technologies coming for inspection and loss control as well.
Are your commercial insurance consumers utilizing all available technology to facilitate prompt and accurate claims reporting? Have they given feedback to the agent/broker and carrier about how specific technology has helped (or not helped) the organization?
Examples of IoT devices in commercial insurance:
Equipment sensors (to detect issues and remediate them, prevent losses)
Environmental controls and sensors (manage heat and lighting, monitor workplace safety, smoke, fire, leak detection, etc.)
Fleet management (vehicle location trackers, telematics to monitor and improve driving behavior, monitoring of transported perishables, etc.)
Smart cities: gas and electric utilities, water/wastewater, transportation, waste management, emergency response, building automation, traffic/infrastructure
Smart agriculture (farming): monitoring moisture and temperature, controlling irrigation, cold storage, automated planting/spraying/harvesting.
Life & Health Insurance Impacts
For both the life and health sectors, IoT and wearable biosensors offer the potential to provide more information, better insights, improved efficacy and the preferable outcomes of better health and longer life.
Wearable devices and the data they provide offer the potential for insurance companies to improve the underwriting of life and health insurance policies. The data provided about lifestyle choices and biometrics enable more accurate assessment of client health. This gives insurance companies the ability to better segment and price insurance products.
Several insurance companies have developed IoT-supported policies. For example, a dental insurer provides policyholders with an IoT toothbrush and provides policy discounts based upon brushing frequency and duration. Life insurers are deploying mobile apps that connect to smartwatches and activity trackers. They then provide incentives to the policyholder for engaging in healthy activities.
Agents will be able to offer more competitively priced options to prospects and clients but may need to educate themselves on the new underwriting and pricing methods in order to adequately explain them. Additionally, agents may need to actively seek out IoT-enabled insurance products in order to provide options when savvy customers want them.
Consumers will benefit by having incentive to lower their risk and thereby save money and get more favorable outcomes.
Example of IoT in Life Insurance:
The life insurance company underwrites a prospect with standard mortality tables supplemented by data from the prospect's biosensor (activity tracker). After the policy is issued, the policyholder downloads the insurer's mobile app and connects it to an activity tracker.
The insurance company now tracks policyholder exercise and health data. Analytical tools run against individual and aggregated policyholders, identifying trends and anomalies.
The resulting information allows the insurance company to make policyholder-specific recommendations that are communicated back to the mobile app and ultimately to the sensor, changing goals and offering incentives for appropriate performance.
IoT will have a positive impact on claims in both health and life policies. Early detection of symptoms will provide carriers with opportunities to mitigate or eliminate health crises, and rapid delivery of pertinent historical health information at the time of loss will provide for better diagnosis and treatment. Case management will improve due to frequent monitoring of vital signs.
One item that should not be overlooked is for carrier applications to include connection points to health services providers.
Although agents and brokers aren't normally involved in the claims process in accident and health, the additional information available and claims expense from biometric sensors will impact renewal negotiations and pricing.
Consumers stand to benefit dramatically from IoT-enabled life and health products. Gamification will encourage healthy behaviors, which reduce adverse health issues and promote long life.
Statistics indicate that employers can save three dollars for every dollar invested in biometric monitoring.
NOTE ON THIS DOCUMENT: With this resource, we endeavor to provide IoT insights as a point-in-time snapshot; however, with the amazing speed of advancement of the internet of things, new information will likely develop rapidly. The ACT Strategic Future Issues and Changing Nature of Risk Work Groups will continue to review and update this document when significant advances occur. For the full document, click HERE.
Also, ACT will be focusing on the IoT in our agenda for our May 20-21 ACT Meeting to register and learn more click here.