Amongst the many sectors to be influenced by the growth of IoT, the insurance industry looks set to be one of those making the biggest changes to the way they work. There is a strong possibility that the decades-old business model currently used by insurance companies may be about to be turned on its head. Installing connected devices in homes, offices, cars, and even on riverbanks, would enable insurance companies to collect and utilise the kind of data about their customers that could help them individualise and tailor their service offering. This approach would take away any risk of guesswork involved in providing quotes, and would allow insurers to offer cheaper insurance to those customers with lower risk factors. It would have the added benefit of helping insurers to mitigate fraudulent claims, saving significant amounts of money and hassle, and possibly even instilling some customer loyalty.
It isn’t just data that will make a difference to the way insurers approach their new business model. Automation could play a big part in the change too. By automating operations such as turning on security or emergency lights, or keeping water at a high enough temperature to guard against legionella, companies can be safe in the knowledge that they are fulfilling the criteria that keep their insurance policies valid. Within the current model, building owners and facilities managers must be able to prove that systems such as emergency lighting work correctly as designed and are maintained in full working order. To achieve this, they must carry out manual tests to prove that the emergency lighting works and keep records as proof that they have carried out their duty of care. Imagine how much more cost effective and reliable automated testing would be in these instances, eliminating the risk of human error and alerting facilities managers to any outages or deviations as or even before they happen.
By using integrated systems to automate and monitor factors such as heating, lighting, occupancy, ventilation, air quality and temperature, insurance companies can use data to gauge and analyse risk. The data from IoT-connected devices enable insurers to provide customised quotes to businesses and homeowners that take their individual circumstances into account.
With car insurance policies and premiums at an all-time high and drivers within certain age categories finding it almost impossible to insure their cars for a reasonable rate, the new insurance business model could turn out to be a game-changer for the automotive insurance sector. Drivers would no longer be ‘bracketed’ into risk categories, but would be able to get an individualised quote based not on their driving history, but their driving ‘present’ – as real-time data could influence the cost of their insurance on a constant basis. What better incentive for drivers who might be tempted to ignore the speed limit or use their phone while driving? Take a step outside the law and your insurance company will know about it and put your premium up.
We are being more and more exposed to Usage Based Insurance (UBI) models in the automotive sector and in personal health but why not the Built Environment as well? Changes to the insurance business model will bring benefits to both the insurer and the consumer, and is likely to lead to a more transparent and accurate quotes and claims system, with reduced fraud and cheaper rates for businesses and homeowners who implement connected devices into their buildings. Have you noticed the increase in sensor-based devices such as indoor water leak detectors on the market? These and other similar technologies can make life easier and help to bring our insurance premiums down.
The insurance sector may well become a beacon to other industries, as it continues to embrace IoT to bring positive change for insurers and their customers. Arkessa is already active in this arena providing guidance and connectivity services for large scale international deployments and we look forward to what the future holds for insurance with IoT.