5 Ways the Internet of Things Could Change Everything
By Robert Horn, John Loftus, Brian Dunphy, Alliant
Industry leaders have been predicting that the Internet of Things (IoT) could be the next major technological revolution. Like the spread of the internet itself, or the proliferation of mobile devices, the IoT has already started to reshape nearly every facet of our lives.
Such a major transformation has far-reaching implications for most industries, but this could be an especially large disruptor in the insurance industry. The IoT could reshape broker-client relationships, produce new insurance products and services, and create countless new exposures. Much of the technology is in its infancy right now, but here are five key things you should know about the IoT:
1. “Things” are Getting Smarter.
In the past several years, smaller, cheaper microprocessors and Wi-Fi transmitters have been incorporated into new devices in a more economically feasible way. In addition to “wearables” like smart watches or fitness trackers, things like household appliances and vehicles are more commonly starting to gather data and communicate with users and other devices. In fact, technology research company, Report Linker, stated that the IoT analytics market is projected to reach a revised size of US $81.8 Billion by 2027, growing at a CAGR of 26.7% over the period 2020-2027.
2. Telematics are Already Here
There are a number of possible areas for growth in insurance when it comes to the IoT, but one of the biggest is already here. Telematics—the tracking of vehicle data by smart devices—is already being employed by a number of personal auto insurance carriers. Telematics offers a few novel options, such as pay-as-you-go insurance, which calculates premiums based upon frequency of usage, and payhow-you-drive, which collects data about driver behavior (such as speed, time of day, acceleration/deceleration, etc.) to adjust rates and offer discounts for good driving behaviors.
3. Products and Services from Carriers, Captives and Independent Brokers will Evolve.
We’ve often discussed the commodification of the insurance industry, as well as the transition to a service oriented mindset. The IoT has the ability to accelerate both of these processes. More data points will mean better actuarial data for carriers. Integrated data systems—such as a car/house fitness tracker system—will allow for highly personalized coverage options. It’s likely that, in the coming decades, carriers will consider offering coverages that blur the boundaries of more traditional insurance offerings.
4. New Regulation is Likely-Eventually
Insurance carriers want more data and individuals and companies want to protect their privacy. Life insurance carriers, for instance, could potentially use fitness tracker data to more accurately price out coverage. With enough data at their disposal, coupled with variable premiums and coverage options, losses could become virtually nonexistent for carriers. However, such coverage largely undermines the value of insurance to consumers, and privacy advocates might consider that level of carrier knowledge intrusive. That’s why it’s likely that, in the coming years, regulators will have to decide just how much insurers are allowed to know about insureds before assigning coverage. In order for risk pools to remain viable and mutually beneficial to both carriers and clients, some limits will have to be placed upon policies.
5. New Cyber Exposures Will Emerge
It probably goes without saying, but each new device connected to the IoT represents another potential point of access for criminals. In addition to the sheer number of connections available to hackers, the interconnectedness of IoT devices poses a new kind of threat. Accessing a single device could, in theory, give a criminal access to a person’s home, car, phone, work and many other smart systems.
Looking to the Future
The IoT has already begun to reshape the lives of millions of Americans and experts predict even more rapid growth in the coming decade. The growth has been so fast, in fact, that it is hard to know exactly what will happen next.
For more information, contact:
Brian Dunphy
Senior Vice President
Email
Robert Horn
Co-Cyber Product Leader
Email
John Loftus
Co-Cyber Product Leader
Email
