April 13, 2017

IoT’s Implications for Insurance Carriers


Insurance thrives on data -- and the Internet of Things offers brand new, high volumes of data to work with. The combination could be powerful.

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The Internet of Things can assist the insurance industry significantly because this industry thrives on data, and the IoT offers brand new, high volumes of data to work with.

For example, Liberty Mutual is now offering connected smoke alarms to home insurance policyholders. Because these devices are connected to the internet, they can send alerts to policyholder cell phones if carbon monoxide or smoke is detected.

These smoke alarms cost $99, but Liberty Mutual gives them to home insurance customers for free. If customers install them, they can save as much as 5% on their insurance premiums. This is because early notice about fires or carbon monoxide can significantly reduce the risk of losses.

Connected smoke alarms are just one example of how home insurance is likely to change due to the IoT. In the future, more IoT devices in the house could lead to increased safety in the home and further reductions in insurance premiums.

Other Uses for the IoT

Connected IoT devices could also heavily affect auto insurance. In fact, they have already begun to do so.

For example, Progressive Insurance has already started using something called “Progressive Snapshot.” Progressive Snapshot is a connected device that plugs into your OBD II port in your car. Once it is installed, it can monitor and record information about your driving habits. It then sends them to Progressive through wireless technology.

If the Snapshot data shows that you are a good and a safe driver, then you can be rewarded with a lower premium. However, if the data reveals that you are a risky and an irresponsible driver, then your premium could go up.

Progressive has already made more than 1.7 trillion driver observations with Snapshot. These observations are helping the insurer to find better and more customized insurance rates. Many auto insurers could soon follow Progressive’s lead.

See also: 5 Predictions for the IoT in 2017  

It is also possible that many more people could become safe drivers if they know that their driving behavior is being monitored by an IoT device. So, this could cause a reduction in accidents and traffic violations as well.

IoT Outlook

In addition to home and auto insurance, many other insurance niches will likely take advantage of the IoT. This is because the more accurate that an insurance company’s data is, the better it can price its products to both generate more customers, and reduce its risks.

Health insurance, for example, could benefit strongly from the IoT. This is because wearable devices could help to monitor a person’s health. In fact, devices such as Fitbits and smart watches have already begun providing such data.

See also: How to Reimagine Insurance With IoT  

One source even claims that IoT devices could one day predict heart attacks or problems related to substance abuse. IoT devices could be used to send alerts in such circumstances. This could help to both save lives and reduce health insurance premiums.

Essentially, the IoT is likely to become a huge asset to the insurance industry. It has the potential to make insurance better for both insurers, and customers, and it may also help to reduce injuries, property damage and other types of loss.


About the Author

Robin Roberson is the president and co-founder of Goose &, a boutique consulting firm focused on enabling rapid growth and adoption of emerging technologies. As previous CEO and co-founder of WeGoLook, she grew the business to over 45,000 global independent contractors.

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