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4 min read
Vince Francis

Have you ever wondered why you only talk with your insurance company every so often? Although you and your provider share aligned goals, communication often only occurs at specific points in your journey. This interaction model can be traced to the legacy systems employed by your provider, which were designed to support an annual policy. However, just because the policy is annual doesn’t mean the interaction model has to be.


But what if your provider could offer more valuable services based on the data and infrastructure available to them? What does that do to the interaction model? Imagine how insurers could use automation and technology to provide more personalized and enhanced insurance products to consumers.


The Internet of Things (IoT) represents a new era of connected devices that not only collect and transmit data but also help simplify our lives. The power of these IoT devices, combined with innovative processes and provider support, will drive bespoke, accessible products that benefit both insurance providers and their subscribers.


In this post, we’ll explore some of the top benefits of IoT devices in different types of insurance and how insurers can leverage these devices to improve the customer experience.


Benefits of IoT for homeowners and renters


In the homeowners insurance sector, a collection of IoT devices already exists, designed specifically for residential use. Their adoption benefits both homeowners and insurance providers. As providers utilize these devices, the data and insights they generate can offer standard loss protection and help prevent loss altogether.


For example, water damage is one of the largest causes of homeowner claims, responsible for approximately 30% of all claims each year in the US. Companies like EcoNet produce IoT shut-off devices that can be attached to the main water inlet in your house.


These devices, starting around $200, can be installed directly by homeowners, allowing them to automatically turn off all water to the house when they are not home. Depending on the model, these devices can even dynamically shut off the water if a leak is detected. In short, this IoT innovation effectively prevents runaway leaks in your home.


Restricting water flow drastically changes the risk profile of water damage, just as a home security system alters the risk profile of burglary. This lower risk profile, specific to you and your home, can result in reduced insurance premiums. Providers can assume this lower risk by leveraging technology to shift from a loss coverage scenario to a preventative action scenario.


With these devices installed, insurers can offer the same product or coverage at a discount due to the lower risk profile. Many insurers offer discounted rates for installing water shut-off devices. Liberty Mutual offers discounts for “smart homes” powered by Nest products, and Desjardins goes a step further with its Discover Alert Program, providing discounted rates and hardware purchase discounts.


Benefits of IoT for other types of property and casualty (P&C) insurance


Reducing the risk of water damage is just one example, but the advantages of technology and IoT don’t have to stop at home. Automotive insurance is beginning to use in-vehicle sensors, which can determine the likelihood of an engine failure or a brake line leak.


On the commercial side, insurers are employing technology like GPS tags and LoRa sensors for precise product tracking. Manual inspections and loss inspections can also be supported by digital tools like web conferencing, web cameras and drones to streamline the process.


Taken to the fullest, insurers can leverage new technologies to offer episodic insurance (sometimes called on-demand insurance) to micro-optimize coverage for specific user needs. Even at the macro level, this technology and its associated power are driving a step change felt throughout the industry.


The emerging landscape of monitoring, control and automation is creating a bold new world of technology that directly and tangibly benefits users. Simultaneously, these technologies supply data and information that allows insurers to offer bespoke, user-specific solutions that provide both loss coverage and prevention systems.


The potential of IoT for other lines of insurance


Outside of P&C insurance lines, IoT has the potential to impact and improve other forms of insurance, such as medical insurance or kidnap and ransom.


Telematics: This form of machine-to-machine communication can help determine real-time breaches of warranty for the shipping industry. Telematics could also assist fleet operators in ensuring their drivers rest for the required amount of time and adhere to speed limits.


Wearable devices: Medical wearables, including smartwatches, can help insurers identify patient health statistics, such as blood pressure and heart rate. In another example, IoT sensors could be embedded into devices such as pacemakers to transmit health information directly to patients and providers.


Finding a way forward


As insurers adopt IoT devices more widely, there are bound to be challenges with the large volumes of data these devices produce. To make the most of IoT data, insurers will need strategies for organization and algorithms to identify consumer behavior patterns. With streamlined IoT data, insurers will be empowered to better support their customers as they encounter issues—even anticipating where support is needed—leading to a more seamless journey overall.


IoT devices and their capabilities are evolving rapidly. Whether managing water or power, monitoring occupancy or tracking assets, the list of capabilities grows almost daily. More important than the specifics of what any one device can do is the change (and ongoing dialogue) these devices enable between customers and insurance providers.


To learn more about how we can help insurers adopt IoT by building data platforms and finding ways for disparate technologies to work together, visit us here.


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