Insurance and the Internet of Things Posted by Adam Grant on Jan 21 2016



As a technology aficionado, the impact that the Internet of Things (IoT) has made and continues to make in our lives comes as no surprise. IoT technology has effortlessly changed the way we live, work, communicate, function, shop, manage our health, conduct business and even how we drive.


Many businesses have recognized the value of IoT, but perhaps none more so than the insurance industry. IoT has become an invaluable tool for insurance carriers who continually seek out ways to provide a more personalized level of service to its customers.   The insurance industry is now a prime market for IoT in that it has given insurers a means to unobtrusively gain valuable insight about their market at little to no cost. Access to direct consumer data allows insurance companies to improve customer service by either offering customer specific product options, or providing incentives and discounts to clients who participate, agree to be observed and share information.


Insurance carriers have implemented various methods to facilitate the collection and analysis of consumer data through mobile applications, “black boxes,” sensors, cameras, health monitors and other wearable devices. Although insurance companies recognize the value of legally gathering and analyzing data based on actual consumer behavior as it relates to health practices, driving habits, home security and protection issues and many others, significant hurdles still remain before these programs may be propagated to a wider range of consumers.


Though a good portion of our society would agree that data derived from an individual’s driving behavior provides a quantifiable measure of risk when calculating a driver’s insurability with regard to auto insurance, this rationale is not as clear cut for health and home insurance purposes.   For example, fitness monitors can gauge if an individual exercises regularly and leads an active lifestyle, but it would be hard pressed to determine if perhaps that same person has a penchant for risky activities like car racing or sky diving. In the same token, the presence of security cameras at a residence may give a general idea of the safety situation in certain areas of a home, not the entire home, because it would be surprising to find a homeowner willing to place, let alone share data from, security cameras in bedrooms or bathrooms.


Undoubtedly, the relationship between IoT devices and insurance companies is still in its very early stages. In fact, a comprehensive regulatory framework to address this very subject is still forthcoming. Notwithstanding, data sharing programs specifically geared towards managing auto insurance risks, have already been implemented by some insurance companies in select key markets and cities both in the United States and in Europe, with much success. However, with growing consumer concerns about privacy and control of one’s personal information, the urgency to develop and implement an IoT roadmap to address questions about aggregating and anonymizing consumer information is continually increasing, and all stakeholders must work to ensure that any and all data sharing and collection practices adhere to all the laws and regulations that currently apply.