Blog: Internet of Things - How to realise its full potential

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Insurance still lags behind other industry sectors when it comes to the internet of things. HPE Pointnext chief digital officer Mitchell Feldman explains why underwriters across all product lines should consider how it could help them price risks more accurately.

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Mitchell Feldman, chief digital officer, HPE Pointnext

The rise of the internet of things spells potential for significant growth among businesses of various sectors. However, that growth could also come with various implications which these companies would be wise to carefully heed.

An especially good case in point is the insurance industry, which can now use IoT to collect data informing its practices and premium levels. Still, this data remains evidently underutilised.

Currently, the insurance sector is trailing many other industries in the execution of IoT. Research into a range of industries has found just 36% of respondents to deem their insurance firms capable of using insights from fresh data sources to improve value to customers.

However, there are various ways in which insurance companies could realise rich potential in using data from IoT. For example, a motor insurer could look at telemetry data sourced from connected cars as a means of assessing the safety of the driver’s practices on the road.

The insurer could then hand safer drivers lower premiums - and, indeed, health insurers could make the same available to a smartwatch wearer who, according to data from their wearable, has a healthier-than-expected lifestyle. However, insurance implications could reach yet further.

In an interview last year, Nick Arydon - then head of strategy and development at Aviva - revealed that his company was trialling a “proactive” use of IoT. This included looking into how it could help insurance in “changing from a reactive repair service to a proactive service” enabling people to act on a developing problem before it becomes more costly to fix.

However, Arydon also emphasised that these trials were involving relatively few people. He explained: “With all this stuff that wasn’t invented a couple of years ago, that kind of approach is prudent.” This could help to explain why so much of the potential is still unrealised.

While it would be wise to urge insurers to exercise caution in taking up IoT technology, it remains interesting to consider how such uptake could work in practice for different types of insurers. For example, if a car accident occurs and the driver and eyewitnesses disagree about who was at fault, a telematics device fitted in the car could present data that sheds light on the subject.

Meanwhile, if a home has a fire detector connected to an IoT system, that device could - upon detecting a blaze - pass this news onto the homeowner to help ensure that the fire can be put out before reaching the point where the entire property could become engulfed in flames. As a result, the damage could be less serious, and so a payout via home insurance would be lower.

The potential is evidently there; it is now incumbent on insurers to put the relevant infrastructure in place to seize the opportunity.

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