Let’s say you speed through the supermarket for some groceries. At home you find out that you forgot the milk. So, back to the shop isn’t? No, Stop! There is a smarter solution: a fridge equipped with sensors connected to the internet. The sensors register when you’re low on milk and the fridge automatically orders new ones. The supplier then delivers the order to your home within a specific timeframe. That means no more hassle for you. Despite not being widely used in practice, the smart fridge is probably the best example of the Internet of Things. Linking devices to the internet is on the rise and the possibilities are endless. You’d expect all of this information to be a goldmine for insurance companies, but is it?
Smart home gadgets
Smart home devices can function independently and take over certain tasks: temperature regulation and lighting based on absence or presence; intelligent security that knows who’s home and allows you to open doors remotely; appliances that learn your habits (coffee at 08:30 AM every day, except for Sundays, when it’s a espresso at 09:30); the home assistant that learns from your choices and, makes film and music recommendations; the eHealth system that helps elderly people live at home longer and supports people with chronic illnesses or disabilities.
Devices like these are connecting the world and making it smarter. In cities, traffic can be regulated more efficiently, which means no more waiting for a red light. This will ultimately force traffic light manufacturers to search for new product lines. The environment can be monitored, as can our safety. In many places, indoor and outdoor cameras record our every move and our mobile devices track our location. So do our cars. Information about the technical health of your car and your driving behaviour can be recorded and shared. Ultimately, all vehicles will be connected to each other and to the environment to regulate traffic safely and efficiently.
Internet of Things and security
An estimated 25 billion devices are connected to the internet worldwide. And that’s just the beginning. All of these connected devices are potential windows to our personal information, giving hackers unlimited opportunities to wreak havoc. They could retrieve valuable information such as passwords, bank account details and private photos. And it doesn’t stop at information theft. The Internet of Things also makes it possible for hackers to take over devices. They can hijack your computer until you pay a ransom. Hackers can see you on your security camera and blackmail you with images you don’t want others to see. These are just a few obvious examples.
Opportunities for insurance companies?
Taking out insurance policies and processing damage claims responsibly requires information. Information about the policyholder, the insured objects and the circumstances in which the damage occurred. Information is also an important tool for marketing and product development. You’d expect insurance companies to eagerly harness the information generated by the Internet of Things, but, in general, they don’t.
Insurance companies can use Internet of Things as a strategy to offer additional services to policyholders. For example, they could notify home-owners when their boiler is due for maintenance or when their home is sensitive to break-ins. They could also identify the cause of a fire or other incident or link insurance implications to inadequate maintenance. Then there’s the preventive and cost-saving possibilities offered by eHealth applications.
The Internet of Things has slowly been adopted by the automotive industry. The technical condition of a car can now be monitored and driving behaviour observed. If essential components are not being properly maintained, it could have insurance implications. The same applies to irresponsible driving styles that lead to dangerous situations or accidents. It’s also possible to use telematics to quickly determine the scope and cost of damage without having to call in an expert. Sensors in the car register the exact location and the extent of the damage. This innovation also makes it easier to determine fault. It’s also possible to take out an on-demand insurance policy, which means the all-risk coverage is only activated when the car is in use.
On-demand insurance coverage is now available on a limited scale, allowing users to arrange or activate their policies on their mobile devices. Using location positioning, your phone can determine that you’re at Schiphol Airport and prompt you to activate your travel insurance. It can also warn you that you’re in an area known for high pickpocketing rates.
Untapped potential for insurance companies
The Internet of Things offers endless possibilities. In fact, we haven’t even scratched the surface of what’s possible and what will one day become possible. That said, it also evokes images that some may find disturbing: Big Brother is watching you. Who wants to be constantly monitored or receive constant unsolicited advice? And there’s another practical obstacle: the generated data isn’t available to just anyone. Fortunately for us, there are privacy laws in place and most data is controlled by specific parties, like car manufacturers, energy companies and security firms. Partnerships are therefore necessary to gain access to this information. The question is whether these partnerships are profitable for insurers.
The Internet of Things is here and it’s growing exponentially. For insurers this appears to be an untapped area that indeed holds certain obstacles, but at the same time has the potential for great opportunities.