Three years ago IoT (Internet of Things) was just a buzz word, but today it is an accepted reality and an important factor that is driving growth for many industries, including insurance.

Googling the term brings up about 200 million results and that’s set to keep growing. According to Forbes, there are 6.4 billion devices already connected to the Internet and 5.5 million new ones are added every day. That substantial number brings with it a raft of new opportunities for companies across industries but especially so in the insurance sector.

Using devices that can be connected to the internet opens up the ability to gather data from devices connected to cars, home appliances and wearable gadgets and turn that into insights which can help insurers deliver relevant and targeted products and services.

Of course, to do this there needs to be some buy-in from customers to give the OK to insurers to use IoT devices and that’s where trust is paramount. But while customers might have been sceptical to have their lives monitored using fancy new technology, Millennials are embracing this and the benefits that come with it.

A connected generation and what that means for insurers.

Data openness is becoming the norm for Millennials. In the social media age many have effectively put their whole lives in the public domain, with constant updates of what they’re doing, where they are, and who they’re with being broadcast to their networks. The security mindset of keeping their lives private is quickly being eroded.

In the auto insurance industry, the Millennial generation is often significantly penalised with high costs because this age group contains inexperienced drivers that are more likely to have accidents and therefore file claims. But customers today expect personalised offerings which reflect their behaviours and, for many in this life stage, if they could surrender some of their privacy for a discount they would. Or at least their parents would…

A new European auto insurer has seen this as an opportunity to base rates on an individual’s actual driving history, instead of the aggregate pool of drivers, and turned to IoT devices to achieve this. It uses telematics (devices which gather data) placed in the vehicle to record near-real-time information about location, drive time, acceleration, speed, braking and other dimensions of driving. This telematics data is then used to personalise and increase objectivity and accuracy in pricing and claims processing. By harnessing the potential of IoT, the company grew from zero customers to more than 20,000 within its first year in business.

Collecting data in real time can also help reduce claims fraud by identifying precisely what has happened in an accident and then running this information against what has been claimed.

There’s also the potential for these devices to help save lives in the event of an accident by determining the severity of a crash and alerting emergency services immediately.

Is there enough trust?

While Millennials might have no qualms relinquishing their information for discounts and tailored offerings, there is a large section of the market who wouldn’t be so forthcoming with their detailed behaviour.

There’s also the point to be made that Millennials might not understand their openness is a double-edged sword. On one hand, there is an expectation an insurer will know all the information about a customer and use this to aid in providing a personalised service. But on the other hand, if a claim is declined a customer might contest the information used to do this and question who granted access to that, forgetting that they happily gave access to it.

The value to insurers of IoT devices depends on the extent to which customers trust firms with this potentially sensitive data. The majority of customers remain cautious about sharing their personal data and businesses that wish to capitalise on the IoT need to foster digital trust with their customers. That means showing customers their devices and data are secure and that their personal information will be protected. 

How can insurers build greater trust with customers to implement IoT initiatives?