You may have heard the latest business buzzword "the Internet of things" lately but what does it mean? The Internet started in the 1980s when computers started talking to other computers, however the "Internet of things" or "IOT" refers to "things" talking to other "things" via the Internet without human input.
Some may say the future is upon us; smart devices connecting to the Internet make our lives easier by allowing us to communication with our lighting, thermostats, appliances, entertainment and security systems. Furthermore, telemedicine systems which monitor patients with cardiac and diabetic conditions can save our lives by collecting data through sensors and sending the information to our doctors using mobile technology.
Customers still prefer to deal with people and despite the glut of information available, even the millennial generation consider the advice of friends and family above all when making consumer choices. Nevertheless, as the IOT rolls on, the future of business will bring increased connectivity and worldwide integration of information. Consequently customers will expect more clarity of information and expect constant connectivity to their service providers.
So what does IOT mean for insurance? Predictive analytics is the basis of how insurance companies decide how to treat customers: Information on people and their past behavior is the greatest indicator of what to expect in the future. Whereas the gut instinct of an underwriter still plays a part, many decisions are made automatically by a computerized system. Already, some insurers in the United States are using telematic devices to monitor driving data. For insurers of commercial truck drivers, the dashboard camera may be upgraded to the drivers wearing google glass to supervise their attention on the road. As a result, careful drivers are rewarded with lower premiums and risky situations are monitored and controlled.
Some insurers already stipulate the use of burglar and fire monitoring equipment as well as the air quality and humidity controls in buildings, particularly when it comes to periodically unoccupied premises. Smart home technology and monitoring can certainly reward good customers with less restrictive cover and perhaps a reduction in premium.
The possibilities are limitless in the mind's eye. Perhaps health insurers will monitor lifestyle choices such as exercise and food choices via chips in your treadmill and refrigerator. Smart clothing can send data making sure physiotherapy is being complied with. Carpets may detect when a person falls and air quality can be monitored for mold.
The increased collection, analysis and monitoring of data has its advantages but there is also tremendous responsibility. When following the IOT trend, insurers and other businesses alike will have to make sure that network and data security is paramount. There will also be an overwhelming amount of data that will be produced, stored and analyzed and businesses will need to increase their capacity in order to manage as those excel sheets just won't do.
IOT overall will have a positive impact on the insurance industry, with the dynamism of pricing for the individual risk and the extreme reduction in claims and loss control. However, with such streamlined automation reducing the human element of error, we may end up living in a world where risk is so diminished that insurance itself may become obsolete. Only time will tell.
o Stephanie Cleare is a fully licensed and qualified account executive at Tavares & Higgs Insurance with 12 years experience in the Bahamian insurance industry. Email her at scleare@tavareshiggs.com.
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