“INSoT” – The Insurance of Things and the Proliferation of Protection

By Nick Bilodeau Head of Marketing, Insurance, Canada, American Express The insurance industry is about to get a lot more interesting. Much has been written in recent years about the increasing integration of the Internet, technology, and data into all parts of life and everyday objects.1,2,3 And beyond the literature, looking at what’s already in the market, it’s quickly becoming apparent that this will profoundly change the way we live. From FitBit activity trackers and Nest learning thermostats, to even smart fridges that provide real-time grocery lists and smart mirrors that offer customized skincare routines, we’re already beginning to get an early glimpse of what’s to come. So, what does this all have to do with insurance? Over time, this growing digital interconnection – commonly referred to as the Internet of Things (IoT) – will have a knock-on effect, enabling a wide range of value-adding benefits and services across many industries as it continues to evolve. Insurance will ultimately be a part of these benefiting industries and will increasingly become more broadly integrated into our day-to-day lives – in what could by extension be referred to as the “Insurance” of Things (or INSoT). An INSoT world will bring about the next generation of protection. It will be a world in which sensors, real-time big data, and advanced analytics blend with policy-holder profiles to produce a more profound and holistic understanding of customers, their environments, and risks in need of coverage. This deeper level of understanding and interconnectivity will in turn support the broader delivery of protection and risk mitigation, whether in new forms of insurance products, loss prevention, or recovery support. Integrated Insurance Products On the product side, our device-oriented and data-sharing society will enable insurers seamlessly to provide consumers with ongoing opportunities for protection. Product offerings will be personalized and relevant, and many will be built to also help influence behaviour positively and improve lives. Take Usage Based Insurance (UBI) for instance. Though UBI has been around for over a decade,4 advances in technology are expected to significantly increase market penetration, moving UBI from a small niche to the commonplace and making “pay-as-youdrive” much more prevalent over the next decade.5 Mobile apps and factory-installed telematics in cars will help layer live driving behaviour data into driving histories and provide more customized rates tailored to an individual’s own driving habits. Leading auto insurers like Progressive, Allstate, and State Farm already have 1 A. T. Kearney, Internet of Things 2020: A glimpse into the future, https://www.atkearney.com/documents/4634214/6398631/A.T.+Kearney_ Internet+of+Things+2020+Presentation_Online.pdf/af7e6a55-cde2-4490- 8066-a95664efd35a. 2 EY, Internet of Things: human-machine interactions that unlock possibilities, http://www.ey.com/Publication/vwLUAssets/ey-m-e-internetof-things/$FILE/ey-m-e-internet-of-things.pdf; 3 PwC, Sensing the future of the Internet of Things, http://www.pwc.com/ us/en/increasing-it-effectiveness/assets/future-of-the-internet-of-things.pdf; McKinsey & Company, Internet of Things, http://www.mckinsey.com/ global-themes/internet-of-things/our-insights. 4 Constandinos X. Mavromoustakis et al. (eds), Advances in Mobile Cloud Computing and Big Data in the 5G Era (2017). 5 Usage-based insurance expected to grow to 142 million subscribers globally by 2023, IHS says, http://news.ihsmarkit.com/press-release/ automotive/usage-based-insurance-expected-grow-142-millionsubscribers-globally-2023-i. InsurTech Now and Nex t 44 programs in place and many others are following suit.6 UBI is also expected to increase accessibility by allowing previously uninsurable or difficult to insure drivers to get coverage through new monitored coverage programs. Such programs will help teach these drivers better driving behaviours and in turn give them the opportunity to earn better premiums. In life and health, wearables will make possible ongoing risk profiling and “pay-as-you-live” pricing. Life insurance policies, for instance, will not only provide protection and peace of mind, but also help you live longer. Leveraging gamification principles and technology, policies will be designed with dynamic premiums that vary based on factors like eating habits (gleaned and tracked through food content recognition apps), as well as activity levels and vital signs, captured and tracked through connected health devices. Early forms of this are currently available, with carriers such as John Hancock and Zurich having programs that offer discounts for meeting fitness targets and adopting other health benefiting activities.7,8 And as digitally derived efficiencies in distribution, underwriting, and administration reduce costs and improve integration with other industries, we’ll also see a significant growth in on-demand smallticket insurance offerings. From locking in low gas prices at the pump to getting incremental life coverage at the airport minutes before take-off, highly personalized and context-relevant solutions will be woven into everyday life. Integrated Loss Prevention But data in an INSoT context won’t only be leveraged to better understand customer needs and offer personalized products. Just as importantly, it will be put to use to drive early loss detection and risk prevention, and ultimately to reduce the frequency and severity of accidents and claims. Connected cars, homes, health devices, and the ability to connect virtually anything else will allow for real-time monitoring, feedback, and mitigating measures. This is where the lines defining roles and responsibilities around prevention will get increasingly blurred across industries. It’s where partnerships between very different types of organizations will become a lot more prevalent. And it’s also where insurance companies will need to evolve the most – from being reactive payers of claims to proactive and collaborative providers of loss prevention support

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