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The Internet of Things: Helping Insurers Make Better-Informed Decisions about Risk

Stephen Busateri
Insurance Experts' Forum, July 28, 2014

Sometime between 2008 and 2009, the number of devices online surpassed the number of people, giving rise to the Internet of Things (IoT), an ever-expanding ecosystem of smart devices that use wireless machine-to-machine (M2M) technology to communicate with each other and with business systems.

From smart buildings, homes and meters to connected cars, livestock and crops, the IoT is already transforming industries as diverse as energy, automobile manufacturing and agriculture. Others, including healthcare, retailóand insuranceóare on the verge.

The IoT is a major game changer for the insurance industry, and will likely affect every part of the insurance value chain. After all, insurance is data-driven, and thatís exactly what the IoT can deliverórelevant, actionable, real-time data that can provide an accurate picture of what is beingóor may beóinsured.

Whether itís the temperature, humidity and air quality inside a cargo container; heart rate, blood sugar and oxygen levels of a patient receiving in-home care, or the number of hard brakes and left turns made during an average commute, the IoT can provide insurers with the information they need to make smarter decisions about risk and rates.

Early adopters of usage-based insurance (UBI), for example, are already reaping the benefits of the IoT, as they write policies that reflect their customerís actual driving habits, both good and bad.†

Not only that, low-risk drivers are flocking to sign up for UBI policies, hoping to be rewarded for their good behavior. This means, of course, that the late adopters will be saddled with more high-risk drivers and unbalanced pools.

Not surprisingly, the majority of industry experts view UBI as the future of auto insurance. What is surprising is that consumers do, too. According to a recent survey*, nearly 90% of U.S. survey participants are open to buying a UBI policy if there is no risk of their premium increasing. And that same majority is also willing to change their driving behavior, indicating that UBI really does have the potential to make our roads safer.

Yet a recent poll of 101 insurance executives showed that only 15 percent are testing or piloting UBI programs, and a full 40 percent are not yet even considering one.

So why the huge gulf between consumer demand and industry adoption?

Thatís just one of the topics that will be covered at ďHow the Internet of Things is Transforming Insurance,Ē an event cosponsored by Insurance Networking News†and Verizon.

Insurance Networking News†Senior Editor Chris McMahon will moderate a high-level discussion of the opportunities and challenges presented by the IoT, including the current state of UBI, the benefits of real-time data collection from remote sources and how wireless connectivity and analytics will enhance pricing and product strategy.

If you canít make it to Chicago for the eventówhich will be held in the legendary Drake Hotelóbe sure to tune in to the live simulcast here.† To register, or for more information, log on to http://www.insurancenetworking.com/conferences/insuranceiot. I hope to see you there.

Comments (1)

Stephen, thanks for the article. Can you give the sources of the 2 surveys you mention on high consumer UBI acceptance and low insurer UBI plans?

Posted by: Kevin Haydon, Exigen | October 3, 2014 10:35 AM

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