Impact of IoT in Financial Services – Insurance Industry
Nearly Two billion people are connected to the internet. During the last twenty years, the technology revolution had an intense and irreversible impact on Human life. We all are aware of the internet. IoT is the advancement of the internet. IoT allows virtually endless connections and operations to take place. “Anything that can be connected, will be connected “by IoT. The Primary objective of this research paper is to analyze the impact of IoT in the insurance Industry which is a major part of financial services. The IoT made financial service available to more customers and eliminated geographical barriers. This paper also discusses the origin of IoT, IoT in different types of Insurance and the application of IoT in the insurance industry by foreign Nations.
What is IoT?
IoT is the network or system of an interrelated computing device, sensors, living creatures or objects that have unique identifiers and can communicate with another device on the internet. These objects or “things “are capable of transmitting data. In other words, in IoT real, physical and virtual world interact with each other. It is independent communication between objects that helps optimize operation, reduce cost, boost productivity and improve lives.
“ IoT “ started life as the title of a presentation made by “Kevin Ashton”, an American scientist at European Union conference held at “Proctor & Gamble ( P & G )” in 1999. According to Kevin Ashton, we need to empower computers with their own means of gathering information, so they can see, hear, smell the world for themselves, in all its random glory. If we had computers that knew everything there was to know about things use data they gathered without any help from us. We would be able to track and count everything and greatly reduce waste, loss and cost. We would know when things needed replacing, repairing or recalling and whether they were fresh or past their best.
Role of Iot in Insurance Industry:
According to Robert mehr,” Insurance is a social device for reducing risk by combining a sufficient number of exposures to make their individual losses collectively predictable. The predictable loss is then shared proportionately by all those in the combination”.
Insurance is a contract between two parties namely, the Insured and the Insurer. Insured is the person who insures his life or property and insurer is the company which undertakes to compensate the loss incurred by the insured for a consideration called premium. The contract of Insurance is also called a contract of indemnity except for life insurance, as the insured is only compensated and not allowed to earn any profit from the contract.
As the Internet of Things begins to deliver gains in productivity and savings on everything from appliances and automobiles to turbines and pipelines, new opportunities have emerged in the realm of finance. The networks of sensors and Big Data analytics that help prescribe more efficient maintenance schedules and predict potential system failures can also deliver new levels of transparency to those who provide loans and insurance to these industrial and infrastructure investments.
The IoT plays an efficient role in house, life, vehicle, fire and marine insurance.
- A. Wearable or personal technology
- Sensors on objects
- Location Sensors
- Geographical information system (GIS)
- A. Wearable or personal technology:
Sometimes monitoring heart rate, steps walked and other health-related metrics. This technology is rapidly developing, with prototype patches already performing blood work and ECGs and automatically administering drug doses.
2. Sensors on objects:
It includes personal and commercial vehicles and shipping containers, that measure distances traveled, speeds and frequency and level of braking.
3. Location Sensors:
Such as those in sensors, including “smart thermostats,” security technologies, such as alarms and cameras, and industrial control systems.
4. Geographical information system (GIS):
As well and that may include drone and satellite imagery While this data is directly accessible by or streams to insurers via sensors or mobile devices, third-party organizations may also play a role in owning, aggregating, and distributing to insurers. All of these data types are potentially useful for the full range of products and lines of business, from commercial (which was an early adopter and has been an advanced user of such data for many years), to life, property and casualty and health.
IoT in Life Insurance:
Sensory devices such as wearables, nearables and Hearables have unique advantages, each with an aim of simplifying the human lifestyle.
- Using body sensors for health monitoring to stay fit and guard against any health hazards.
- Remotely manage equipment such as machinery on an assembly line, making the work place safer for employees.
- Hands free access to data via smart glasses or a smart watch.
- When entering a movie theatre for eg: beacons could be automatically silencing your phone.
- Nearables deployed on a laptop send information regarding Laptop sense information laptop excess heating to smart phones.
- Will remind the user through smartphone if he forgets the laptop at any place.
- It reelects light off to blood vessels near the skins surface to track heart rate, temperature, speed and distance while allowing the user to enjoy music simultaneously.
- A user’s fitness data, including calories burned, can be sent to a smart phone through Bluetooth.
Iot in House Insurance (Smart Homes):
What do you get if you combine the Internet of Things with the business of home insurance? U.K. startup Neos is hoping the answer is prevention rather than (just) payouts.
Its home insurance product is intended to lean on sensor tech and wireless connectivity to reduce home-related risks — like fire and water damage, break-ins and burglary — by having customers install a range of largely third-party internet-connected sensors inside their home, included in the price of the insurance product. So, it’s a smart home via the insured backdoor, as it were.
Customers also get an app to manage the various sensors so they can monitor and even control some of the connected components, which can include motion sensors, cameras and smoke detectors.
The Neos app is also designed to alert users to potentially problematic events — like the front door being left open or water starting to leak under their kitchen sink — the associated risk of which a little timely intervention might well mitigate.
It sees additional revenue opportunity there too — and is aiming to connect customers with repair services via its platform. So, the service could help a customer who’s away on holiday arrange for a plumber to come in and fix their leaky sink, for example (there are no smart locks currently involved in the equation, though — Neos customer can name trusted keyholders to be contacted in their absence).
“The vision really is about moving insurance from a traditional claim, payout type solution… to one that’s much more preventative, and technology’s really the enabler for that,” says co-founder Matt Poll. “We also think that customers get quite a raw deal from their insurance company… for being a really good customer and not claiming… And no value.
“So, what we’re trying to do is to provide value to customers throughout the term of their policy — allowing them to monitor their own homes, using our cameras and the devices that we give them. If there is an issue, they’ll get alerted. Most importantly they or us through our monitoring center and assistance service can put the things right… In that sense, both the customer and us benefit if we’re successful.”
On the insurance cover front, Poll claims there’s no new responsibilities being placed on customers’ shoulders — despite all the sensor kit that’s installed as part of the package. “There’s no responsibility placed on the customer. We’re really clear about that,” he tells TechCrunch. “Customers do ask this question — oh what if I don’t arm the alarm, does that mean I’m not covered? And our answer is simply of course you’re covered.”
The startup was founded 18 months ago by Poll, an ex-insurance guy, combining with a more technical co-founder. The team market tested their proposition last year in and around London, partnering with Hiscox on the insurance product offering for that trial. They’re now launching their own branded insurance offering nationwide.
Neos is actually offering a range of home insurance products, including a combined content plus buildings insurance offering (or either/or) across three pricing tiers — aiming to support different levels of coverage and different types of customers, such as flat versus house dwellers, for example, or homeowners versus tenants.
While it’s generally aiming to be tech agnostic when it comes to which smart home sensors can be used — supporting a range of third-party devices — Neos has developed its own smart water valve, for example, as Poll says it couldn’t find an appropriate existing bit of IoT kit in the market for that.
“It uses machine learning to monitor an individual’s water signature within their property over a period of a couple of weeks and then we can identify from that if there’s any leaks — small or large.
Impact of Iot in Insurance Industry:
The IoT’s impact within insurance is coming fully into focus. At the highest level, better use of IoT and sensor data means insurers have the opportunity to:
- Establish direct, unmediated customer relationships
- Gain more granular and precise understanding of who their customers are and how their needs change over time
- Individualize offerings of products, features and access options For insurers that have relied on agents and brokers,
customer data represents enormous change. Historically, much customer data was unavailable, and the information insurers could access was often subjective or inaccurate. Consider the common misrepresentation of data around certain behaviors driven per week) on insurance applications. The IoT opening up new possibilities in many functions. Coupled with advanced analytics capabilities, new data streams and sources have set the foundation for entirely new business models. Usage-based insurance (UBI) — so-called “pay-as-you-live” or “pay-as-you-drive” business models — have quickly moved out of pilot phases and proved their viability and value around the world. In fact, there are an estimated 5 million active UBI policies in 35 different countries. From this relatively low base,
EY estimates that UBI policies will reach 15% market penetration by 2020 in Europe, Asia and the Americas.
IoT made close relationship between insurer and customer. This helps the insurer to understand their customers well and in an expansion of the business. Through the service rendered by the insurance company, customers able to lead a safe and comfortable life. Thus, IoT creates a positive impact on both the customer and insurer’s life.
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The writer is an II – B.Com., student Theivanai Ammal College for Women.