How the Internet of Things Can Revolutionize the Insurance Industry

Usage-based insurance—enabled by IoT-enabled sensors—promises to benefit insurers and their customers, provided that privacy issues are properly addressed.
By Graeme Parton

In the Home
Cars are an obvious and easily relatable example, but there are various opportunities for the IoT to impact how we insure homes as well.

A key example of this is in France, where new legislation states that every home must be equipped with a smoke detector. One insurer is offering a service, utilizing IoT-connected alarms, to ensure that these devices are functioning properly at all times. Consequently, this can bring peace of mind for customers and reduce the chance of fire damage.

The point is that if sensors can warn homeowners and tenants of potential danger to their properties, they have a chance to take preventative action and avoid a claim altogether. With fewer claims to pay out for, insurers have the chance to lower premiums and keep customers happier without impacting their own profits.

The Next Steps
It's pretty clear that IoT connectivity has a big part to play in the insurance industry, just as it has in most other areas of modern life. Business Insider, for instance, estimates that 50 million people in the United States alone will have tried usage-based insurance (UBI) by 2020. That's not to say the path is completely clear, though.

One of the biggest obstacles surrounding the Internet of Things and its growth is privacy; people are understandably worried about what happens with their data, and many are reluctant to give it up. The key here is for insurance companies to make the incentives obvious—to be clear about what data they're taking, why they're collecting it and how its collection benefits the customer.

If someone can see that she is saving $150 (£100) a year because her insurer's device is monitoring her driving style, she'll be less likely to care that her driving is being remotely monitored.

Graeme Parton is a writer specializing in technology and working on behalf of Arqiva, a communications infrastructure and media services company. With a background in journalism and marketing, he has covered everything from big data and business intelligence to cloud computing and the Internet of Things.

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