How IoT will Change Insurance Policies Forever
We live in a world where almost all appliances, devices and vehicles come fully equipped with the capability of being connected to the Internet. This is the age of the Internet of Things (IoT); where everything and everyone can transfer and receive data without the need for any human-to-human interaction. As our devices transmit more and more data about ourselves and our day-to-day activity, insurers have stepped up to create innovative and personalised insurance policies, which will result in you saving quite a bit of money!
The traditional model of insurance policies was designed to cover the risks and hazards faced by the average person. This entails having to technically pay more on your premium, as you pay for all the ‘average risks’, regardless of the possibility of you ever facing them. Additionally, since traditional insurance policies are tailored around the activity of an average person, making successful claims for risks faced by those leading different of unique lifestyles may be rather burdensome, unless you have your own tailored insurance policy.
But with the advent of IoT, these problems will soon be things of the past.
With your devices and appliances transferring more data about our daily activity, insurers are in a position to get a more calculated look into the risks and hazards you take.
They say your past behavior is the best indicator of your future behavior. Thus, the insurer, by analysing the data transferred by your devices and appliances, can create a customised insurance policy based on covering the risks you are more likely to face in the future.
Given the constant inflow of data to the insurer, IoT ensures regular dialogue with insurers, which means more information to prevent risks, resulting in increased savings on your income. As more information is made available, the more customised your insurance policy will be, ensuring that you won’t have to spend anything extra on ‘average risks’ you are unlikely to face.
But that’s not all. As IoT increases, it will be far easier to prove insurance claims. For example, if, God forbid, you meet with a road accident, the ability of today’s vehicles to upload details such as the location of the accident, the speed you were traveling, the last time you serviced your vehicle, and whether you were obedient of road rules, will make the claims process so much easier as a stock of hard evidence on the incident will be uploaded on the Internet ready to be analysed. Additionally, since your behavior in the past is recorded as well, rule abiding drivers who have no history of being reckless will be able to prove their case with far less hassle.
But where the insurance industry is really being creative is by using IoT to take on a rewards-based preventative approach in reducing risks. Using devices and appliances that transmit data, insurers have created policies that are not only personalised, but reward you for being proactive against risks.
For instance, fitness trackers and appliances such as Jawbone, Fitbit and Vessyl, can be linked with your insurer who will give you discounts on your premium for your health insurance for exercising taking preventative measures from using your coverage. Similarly, Progressive Snap Shot can be used by drivers to record their good driving habits and transmit the data live to their insurer and get discounts on your vehicle insurance premium.
Additionally, tech companies such as Nest, Rachio, and Notion, are creating sensor systems to be fitted in houses which can detect leakages, breakages, and unnatural activity in the house to help you find problems before they become a too big to handle. The discounts afforded to those displaying preventative behavior incentivizes people to avoid risks and live healthier and hazard free lives.
These Connected Coverage and Usage-Based Insurance (UBI) policies are the future of the insurance industry. No longer will insurance companies work around the reactive claims model, as with IoT the industry is gearing towards preventative models and rewards-based packages. In the US alone, it is estimated that within the next five years over 50 million people will have some form of UBI coverage.
Given the rapid growth of usage of devices linked to the Internet by the average Sri Lankan, it wouldn’t be too long before connected coverage and UBI change the face of insurance in Sri Lanka as well.