Internet Changing Insurance

Connected devices form the Internet of Things, and it is the capability to draw data from such devices that insurance companies are using. The application stretches across a number of areas of insurance, from personal health to the assessment of farm animals.

Health is an area where Internet of Things devices are already being used to lower insurance premiums for those who agree to wear the devices and to share data with insurance companies. Wearables like FitBit have been tied to several insurance premiums.

Other areas of consumer related lifestyle data include the use of vehicle telematics devices (devices that enhance navigation, safety and communication features). Those who agree to have these devices integrated with their vehicles can see lower car insurance costs.

There are also other applications of connected devices and some interesting innovations from start-ups. One example is with networked smoke detectors for informal settlements, such as the townships of South Africa. These are "the world's first networked heat-detector designed specifically for a slum environment."

Lumkani devices are networked to each other using radio frequency. When a fire is detected, the alarm sounds in all homes within a 40 meter radius. A variable sound is used signal to users when a fire is in a separate dwelling.

In addition radio-frequency identification (RFID) chips to track livestock for insurance are being used, such as the IFFCO-Tokio system. IFFCO-Tokio is piloting a cattle insurance project targeting more than 25,000 poor farmers and their families in the Indian states of Gujarat, Punjab, Maharashtra, Rajasthan and Orissa.

Moreover, farmers are using weather stations to facilitate crop insurance. This is particularly popular with for smallholder farmers. An example system is ACRE. This shared technology helps to aggregates farmers into groups and enrolls them into insurance programs.

Each of these insurtech initiatives allows insurance companies to collect data and process it. From this, calculations can be run to lower risk, offer different insurance packages (including shorter term ‘micro insurance’); and to personalize communication with customers and, ideally, improve the experience of customers (with the aim of securing customer loyalty).