Author: Rick Morgan and Ron Berg
The significance of the impact on insurance of the internet of things is coming into full focus. It is now clear that new data sources from IoT technology have the potential to transform virtually every aspect of the insurance transaction and usher in entirely new business models. Thus, the Changing Nature of Risk Work Group is working on an in-depth, revised version of our previously published internet of things risk advisory. We initially wrote the advisory to create awareness and some baseline education around the internet of things. As IoT has become more ubiquitous—over 5.5 million devices are being added every day—it is changing society and the insurance risk. As such, we feel ACT members will benefit from an in-depth dive that can help guide their strategic discussions. In addition to researching the changes in risk IoT is bringing about, we will also survey carriers to gain insight on their various IoT strategies.
We will focus on completing this deep dive through the first half of this year. Using the previous
IoT Risk Advisory as a baseline, this deep dive will also delve into opportunity, disruption, exposures and cultural shifts.
It has become clear that IoT is more than just little gadgets at home. IoT includes wearables as well as sensors on objects like personal and commercial vehicles and shipping containers. Besides homes, IoT location-based sensors are in factories, offices and warehouses. IoT is also joining with satellite technology to provide geophysical and climatological information.
As with any new, hard, technology-based trends, there are opportunities as well as threats. IoT is creating new customer expectations when it comes to the insurance transaction, and we as an industry need a strong and robust response. The goal for this advisory is to advance our ability to provide that.
Wider IoT Use, Broader Exposures
To some degree the industry is already dealing with IoT, but there are implications that go well beyond the devices themselves.
IoT doesn't operate in a vacuum. It will be connected to big data, artificial intelligence and other technologies that are dramatically changing the landscape.
Autonomous vehicles, both personal and commercial, are an often-used but relevant example. As they become more successful and more widely utilized, there will be fewer accidents. This should have a ripple effect to reduce claims and, thereby, reduce premiums. Our industry must adapt to this new reality and other changes to risk exposure and replace or shift income streams that result from this evolution. Also, with the exponential growth of IoT, there will be increased exposure to privacy and cyber breaches that our industry needs to address.
The challenge becomes our ability to adapt to the new demands of a connected world and connected digital consumer—and all that it implies. Are we up to the challenge?
Our
first IoT Advisory opened up the discussion. Now, we are looking to agents and carriers to talk about broader and deeper IoT issues and opportunities—providing real value that helps drive our distribution channel partners forward together.
If there are carriers or agents who want to get involved in this discussion and assist in crafting the document, please send an email to
ACT@iiaba.net.