You’ve probably heard the phrase “Internet of Things” – or IoT – being bandied about as it is a hot, hot, hot topic right now. Whether or not you actually know it, IoT probably already affects your everyday life. A quick scan of Google suggests that IoT has the potential to disrupt everything!
So what is the IoT?
Put simply, IoT is the term used to describe how the internet is increasingly being used to connect people to their devices remotely. It enables people to manage their lives from their smartphones, accessing and controlling physical ‘things’ within their home from their fingertips. It’s been predicted that there will be 50 billion devices connected to the internet by 2020.
Internet-enabled ‘smart’ devices can be anything from mobile phones, fridges, washing machines to wearables, cars or even heart monitors. Examples include the Samsung FamilyHub fridge, which notifies you when you’re running low on milk; and the coffee machine from Smarter, which connects to an app on your phone, waking you up with a chirpy text to say “Good morning! Your coffee is ready. Would you like to keep it warm?” Where IoT is most common, in the UK at least, is home heating and energy use. Smart thermostats, like Hive, let you turn on heating remotely, turn down the temperature if it’s a sunny day, or even turn off when there’s no-one home.
However, IoT is a lot more than just smart homes and connected appliances. There’s even talk of smart cities – think of connected traffic signals that ‘talk’ to cars, or smart bins that signal when they need to be emptied – and industry, with connected sensors for everything from tracking parts to monitoring crops. The new rule for the future is going to be “Anything that can be connected, will be connected!”
IoT has made the physical world one enormous information system.
And what does this mean for insurance?
The vast amounts of data produced by connected devices is now starting to help revolutionise the insurance sector and allow it to personalise policies, reduce operational costs and offer greater value for money than ever before.
Take health insurance for example. With millions of activity trackers, like Fitbit, sold in the UK every year, data generated from these smart devices can be used by insurers to reward customers for being healthy. For instance, customers who join Vitality can get an Apple Watch Series 2 or Apple Watch Nike+ for just £69 (they cost £350 in the shops) and can fund the remaining balance by earning Vitality activity points every month.
Just like people, prevention is crucial when it comes to pet health and analysing real time data can help to achieve this. According to the British Veterinary Association, two thirds of vets say obesity as the biggest health and welfare concern for UK pets. This has prompted RSA to invest in the company behind the ‘doggy Fitbit’ – PitPat. This device monitors the pet’s activity and calories, and shares data with the owner via an app on their smartphone. Owners benefit from peace of mind in the knowledge that their dog is getting the exercise it needs. Similar to black box insurance or telematics for car insurance, PitPat also has the potential to reduce pet insurance costs for owners with active dogs in the future.
In terms of black box insurance, MoreThan Smart Wheels is at the forefront of telematics for young drivers insurance. For the past few years, more and more drivers have been signing up to have little black boxes installed in their cars that monitor their driving behaviour, allowing insurers to track their driving behaviours – including average speed, braking force, and distance driven. In return, young drivers are able to negotiate lower premiums and other benefits.
Insurers are also starting to use utilise IoT technology to reduce the amount of money spent covering home insurance claims. For example, RSA is currently trialling the LeakBot water leak detector, which offers a solution to the issue of hidden leaks by detecting leaks anywhere on the mains water supply in a home, before they exacerbate into bigger, potentially damaging problems. If you have ever suffered the misfortune of an Escape of Water (EOW) claim, which is the second biggest driver of home insurance claims, you’ll know that these claims can cause major disruption and distress. Moving forward, devices such as LeakBot represent a whole new approach to insurance for RSA as they will enable the insurer to help customers prevent or minimise damage to their homes and treasured possessions.
These developments are just beginning, as the IoT is set to transform the insurance industry in new and exciting ways. As Kenny Leitch, Global Connected Insurance Director for RSA commented: “For centuries we have just been there to reimburse our customers over a loss, but going forward we will play a more integral and interactive role in helping our customers limit or even prevent the worst from happening.”
Future insurance will look much different thanks to IoT.