IoT article: Why Insurers are Threatened by Everyone Except Other Insurers

Craig Polley discussing Insurance and IoT at TechUK
Craig Polley from Digital Risk Services discussing Insurance and IoT at TechUK

This morning I attended a TechUK seminar “Insurance and the Internet of Things”.

There were some good speakers who raised quite a few points which I hadn’t heard or thought of until today. Clearly there are some leaders in the space, who are not insurers and are gearing up for a battle for new types of insurance products.

My notes are below. As usual, apologies for brevity, spelling and grammatical errors – all of which are mine not the speakers. It was a fact packed 90 minutes and I struggled to keep up with all the presenters.

Richard Cunliffe from British Gas Hive

“You know the way that advertising turned out to be the native business model for the internet? I think that insurance is going to be the native business model for the Internet of Things” Tim O’Reilly

Hive was setup within British Gas (not acquired). They used a combination of Lean, Agile and customer-centricity (lots of consumer testing).

Black boxes in cars cost £130 to the insurer. They have resulted in a 7.5% reduction in chance of crashing. Overall this saves the consumer (the young driver) £200.

24% of claims are the escape of water, fire is 15% and theft 16%. Hive are investigating how to lower these risks.

Some insurers currently offer discounts on premiums with nest and other automated systems – such as burglar alarms. There is still a lack of insight between those partners – it’s a ‘logical’, commercial partnership discount more than solid research where the insurer has investigated the risk of a specific burglar alarm reducing the risk on a property.

Hive’s process is:

  1. Prevention
  2. Detection
  3. Detecting & Reacting.

Multiple Data Points are critical. Accuracy is vital – consumers won’t put up with false alarms, so Hive are designing ‘robust recipes’ combining sensors. For example, a splash meter and water pressure sensor near a bath, requiring several positive readings over a period of time before alarming the home owner.

Richard raised a good point that I hadn’t heard before – maybe relabel the term insurance when combined with IoT sensors.

Craig Polley from Digital Risk Services

Traditional Insurers use hindsight to understand risk, e.g. previous claims and probability. IoT offers dynamic risk profiling, in real-time. It’s been like this for a decades centuries.

But now, insurers can offer dynamic pricing based on real-time information – right now rather than historical risk trends.

IoT opportunities include:

  • Further growth potential in car telematics
  • Asset protection
  • Connected Premises
  • ‘Human telematics’
  • Fraud Prevention
  • Claims Process Improvement

Central Station Alarms (which are already Machine to Machine, or M2M as they are now known) & car telematics are already widely used.

PAYG (Pay As You Go) car insurance has been in the US since 2004. In 2005 Aviva offered this product, and killed in 3 years later-due to the up front cost.

One company offered an IoT experiment, asking employees to wear electronic bands and found number of employees were on the verge of diabetes!

In terms of privacy, the data collected in health tracking is more sensitive than credit card, date of birth and National Insurance number. This creates a big security problem for our personal data, and also opens up more insurance products!!! These include Privacy Liability, Cyber Risk, Fines & Penalties.

Therefore security ‘needs to be designed at the beginning, including Independent Testing.

Craig finished with a slide showing possible future scenarios:

  • Google getting further into insurers’ space
  • Telco companies or utilities becoming insurers of connected homes
  • Interaction risk for autonomous vehicles (Craig gave the example of a n automated car about to crash and has to decide between hitting a tree or a cyclist)
  • could your car or have become an insurance broker… for example a visitor to your home might transfer their contents insurance and then get cover on your car while they stay

Ian Stewart from Arqiva

IoT isn’t about technology… it’s about businesses undergoing Digital Transformation and changing business models.

Consumers need a curated, integrated service rather than a single device. E.g. fitness trackers need to be combined with diet apps to provide accurate Health tracking.

Lee Brooke-Pearce from Dell Insurance Business Consulting

Lee began with a question for the audience: “Has your insurance experience changed in the last 10 years?” No one put their hand up.

The challenge is why you’ll need to tag all the items in your connected home.

The nub of IoT is the data.

Insurance is already a data business – actuaries already depend rely on data. The move to become a data business should be a natural progression, but insurers haven’t taken the natural path. They’ve let Google and Facebook take the lead.

In the new IoT battle, the question is whether insurers will win, or lose out to telcos, utility companies or new technology startups all converging into the insurance sector.

Lee said many insurers have the aim to become fast-followers which could be a recipe for failure. He recommends that people from outside the industry need to join insurance companies to help them innovate.

Open debate

After the presentations, we had a general discussion with some pretty average questions.

Only one question stood out – why there weren’t any insurers in the room today. TechUK is a highly respected industry body, and other industries (such as banking, identity and payments) are well represented, but when it comes to insurance, only the technology vendors attend the meetings. I had tweeted about this as soon as I saw the attendee list on arrival at TechUK.

It’s time for insurers to start taking the lead rather than aspiring to becoming fast-followers.

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