IoT in the Insurance IndustryWhat it is, why it matters, and how we can help

The Insurance IoT OpportunityWe’ve all heard at least something about how the Internet of Things (IoT) is going to revolutionize the insurance industry. But what does that really mean and, more importantly, what is IoT?

According to Amazon, the term Internet of Things came from Kevin Ashton, an RFID (radio-frequency identification) techy from Britain, who envisioned cheap and highly available sensors connecting the physical world to the internet. What has evolved is a network of things, animate or inanimate, connected to the Internet with unique identifiers providing access to data collected.

According to Wikipedia, “The Internet of things (stylized Internet of Things or IoT) is the internetworking of physical devices, vehicles (also referred to as “connected devices” and “smart devices”), buildings and other items—embedded with electronics, software, sensors, actuators, and network connectivity that enable these objects to collect and exchange data.”

But for the purposes of this article, you can think of IoT as a car that delivers your actual driving performance data to your auto policy carrier, a building reducing energy consumption by turning off lights in rooms with no one present, a home security system that tells your home insurance carrier if and when you secure your home, or a Fitbit given to you by your health or life insurance carrier to provide them with relative real time access to your activity level.

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Smart Vehicles, or vehicles with telematics capabilities is one of the more mature IoT markets. A widely accepted definition of “telematics” is “the integrated use of telecommunications and informatics for application in vehicles and with control of vehicles on the move.”. Here is a great summary of the history and pros/cons of Usage-Based Insurance (UBI) and Telematics equipped vehicles from the

National Association of Insurance Commissioners: http://www.naic.org/cipr_topics/topic_usage_based_insurance.htm

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IoT Adoption Challenges for the Insurance IndustryThere are lots of non-technical issues for insurance companies to deal with in order to fully leverage this new data source, like privacy concerns and regulatory requirements. However the industry bet on how impactful this may be for all of us is enormous. There was $2.6 Billion invested in Insurtech last year, more than the previous 5 years combined.

Robert Reiss of Forbes.com says that The Internet of Things (IoT) could drastically change the $1.1 trillion US Insurance Industry. With 6.4 billion devices already connected, and 5.5 million new devices added every day, the IoT’s real-time data collection and sharing power will create significant, new opportunities in finer product segmentation, improved loss control and accelerated premium growth.

Until recently, the IoT was largely viewed as a futuristic concept with many insurers adopting a “wait and see” attitude. But according to Ernst & Young (E&Y)in their publication The Internet of Things in Insurance, such a posture is no longer viable. Early adopters have established a clear and compelling value proposition by demonstrating how data from in-home and automotive sensors, wearable technology, drones, GPS, mobile and telematics devices, networked appliances and multiple other sources can help grow new business, improve risk assessment and proactively engage policyholders in loss prevention.

The Integration ProblemE&Y says: “Legacy system limitations and the variety and volume of new data requires an overall ecosystem approach, rather than discrete software or “point” solutions. Such a holistic environment will incorporate both internal and external data sources, and both “live” and historical data feeds, proprietary models and real-time analytical outputs. The goal is to enable more rapid and focused action across the board, from analyzing risk and pricing products to making retention offers and servicing accounts. Finding the right partners and integrating external data sources and establishing the right governance policies will be critical.”

But with each of these exponentially growing data partners having unique integration requirements, this task is daunting for insurance carries. Vikram Renjen from Sutherland says “with 21 billion devices gathering and sending data, carriers must immediately re-imagine how they will store, sift through and use their portion of what respected industry analyst IDC predicts will be 50 trillion gigabytes of data produced by the IoT in 2020! The challenge of turning data into usable insight will be immense.”

“Finding the right

partners and

integrating external

data sources and

establishing the right

governance policies

will be critical.”

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So far, the insurance industry has been slower than other industries to respond to this rapidly growing data opportunity. E&Y found the following in a recent survey:

Percentage of respondents, by sector, reporting that their companies can use insights from new data sources to boost customer value.

Ignoring the privacy and regulatory issues mentioned above, the biggest hurdle for insurance carriers to fully adopt this new data source in a real time, scalable, and productive fashion is technology. And one of the biggest of these technology hurdles is the basic task of connecting to each of these partners to get their data, or use their data services.

Real time data integration isn’t rocket science. However, the following factors contribute to this being a huge and daunting task for large insurance carriers:

• The sheer volume of potential IoT partners, each of whom require a data connection. The list is huge already, and growing exponentially as venture capital is pumped into this white hot vertical

• Each partner can have different data formats, integration requirements, tech platform preferences, and degrees of technical sophistication.

• Carrier’s security requirements are extensive and hard to scale across so many partners of varying sizes, technical sophistication, and locations.

• Since the cost and effort to integrate is high due to the issues mentioned here, the ability to test lots of partners before selecting the best is limited

Ironically, it was exactly these issues that formed the basis for the creation of LeadCloud 4 years ago.

Insurers lag in using insights from new data sources

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The LeadCloud PlatformIn January ’13, LeadCloud was launched to help insurance carries more easily connect to their rapidly growing list of marketing partners. These marketing partners included data lead providers, click providers, and call providers. It was hard for carriers to maximize their value for the same reasons mentioned in the paragraph above. LeadCloud provided One & Done integration platform with all of the Best of Breed data providers and data service providers instantly.

In January ’15, LeadCloud released its Carrier Rater Platform that provided the same One & Done integration with a carriers growing list of Rate Partners, which include their agencies, comparative shopping sites, and comparative raters.

And in January ’17, we will launch our IoT Platform. This platform will provide insurance carriers with One & Done integration with all of their IoT data providers and data service providers.

The IoT platform will include individual data standards for each IoT category, with pre-built pipes to the partners. As with our previous two platforms, it will include our full custom workflows for each partnership through our Custom Decisioning Middleware.

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LeadCloud Overview• Almost a million data transactions processed per day• Over 300 partners integrated to the platform with over 2,500 custom integrations

Sample Carrier Clients:

IoT in Insurance ExamplesSometimes, the best way to understand a new technology is to review real Use Cases. We did a quick scan and found the following insurance IoT use cases. We haven’t verified any of these, and have listed all sources below:

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American Family

INSURANCE CARRIER

Progressive

Beam Digital

Oscar Insurance

AXA

State Farm

Progressive

Oscar Health

Allianz

Liberty Mutual

Overwatch

AXA

Liberty Mutual

American Family

Ring

PRODUCT DESCRIPTION

Zubie

Misfit

British Gas Hive

Canary

Censio

Misfit Wearables

Panasonic

Vivint

Withings

Nest

Nest

The partnership offers a financial guarantee on AmFam customers’ insurance deductibles if their home is burglarized as well as discounts on the Ring smart doorbell.

Zubie c ustomers can see how much Progressive would charge them based on Zubie-collected driving data.

Provides a smart toothbrush to help create and monitor Dental plans

Misfit wearables created a wearable technology which allows Oscar customers to earn rewards by meeting their health goals. This will likely expand into larger usages in order to help determine rates, discounts, etc..

Users who bought Hive products are redirected to AXA’s website, which distributes and underwrites home insurance policies.

The partnership gives State Farm customers discounts on Canary products, homeowner, and renter insurance. State Farm also has relationships with ADT Pulse and Iris.

Censio’s sensor technology to measure driving habits and in-car smartphone usage and power its Snapshot mobile app.

Oscar clients receive a free Misfit wristbands that connect with Oscar’s app and pay you to walk.

The partnership connects Panasonic’s smart home monitoring and control system with Allianz’s home protection services.

Vivint customers are offered savings on personal auto and home insurance.

Usage of Drones to replace claims inspectors for property damage, and quicker claims analysis.

The partnership offers AXA customers a free WiThings Pulse as well as possible insurance discounts based on usage.

Google’s Nest also partnered with Liberty Mutual to help offset the costs of a Nest Protect smoke detector and offer a monthly discount on homeowner insurance. Liberty Mutual has its program with Nest available in AL, CO, DE, IL, KY, ME, MN, PA, UT, and WI.

Google’s Nest partnered with American Family Insurance for a program that helps offset the costs of a Nest Protect smoke detector and offers a monthly discount on homeowner insurance. AmFam initiated its program with Nest in Minnesota.

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Data Sources:What is the Internet of Things, Amazon, 2016https://aws.amazon.com/iot/what-is-the-internet-of-things/

The Internet of Things in Insurance, Ernst & Young 2016:http://www.ey.com/Publication/vwLUAssets/EY_-_The_internet_of_things_in_insurance/$FILE/EY-the-internet-of-things-in-insurance.pdf

5 Ways the IoT will Transform the Insurance Industry, Forbes, Robert Reiss, Feb 2016:http://www.forbes.com/sites/robertreiss/2016/02/01/5-ways-the-iot-will-transform-the-insurance-industry/?utm_content=bufferdd35d&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer#7bdd469872cb

Usage-Based Insurance and Telematics, NAIC 2016:http://www.naic.org/cipr_topics/topic_usage_based_insurance.htm

Internet of things, Wikipedia 2016:https://en.wikipedia.org/wiki/Internet_of_things

10 real-life examples of IoT in insurance, Internet of Business, May 2016https://internetofbusiness.com/10-examples-iot-insurance/

How Major Insurers Are Teaming Up With Internet of Things Companies In One Infographic, Insurance Tech Insights, Dec 2015:https://www.cbinsights.com/blog/insurance-tech-iot-partnerships/