October IoTC Executive Roundtable: Marrying IoT with Insurance

Interest in IoT from the insurance industry continues to take off this year with a flurry of investment and partnership activity from the likes of AXA, Liberty Mutual, Transamerica, and more. IoT technologies such as smart homes, connected cars and wearable fitness monitors can have an extraordinary impact on how insurers assess and manage risk for home, auto, and health policies. This month's roundtable asked execs from our IoTC member companies for their expert analysis and perspectives on the increasing alliance between the IoT and insurance industries.

Roel Peeters, Founder & CEO of Roost
Is strategic investment in, and partnership with the IoT industry a smarter model for insurance companies or in-house development of IoT technology? The IoT industry is still nascent.  Requirements from insurance companies are imprecise at best.  With that combination, partnerships and strategic investments are the more prudent approach to hedge their bets on a variety of new solutions and methodologies.  As IoT matures, in-house development could make sense, maybe kick-started with targeted M&A.
How will a marriage between IoT and insurers benefit consumers? IoT can change the insurance industry from purely an indemnification business to also be in the protection business.  IoT can help prevent losses or reduce the severity of losses.  Insurers will be incentivized to subsidize (or give away for free) relevant IoT products.  Furthermore, this will lead to better customer experience and lower insurance premiums.  

Phil Lewer, Business Development & Marketing Director at NXP
Are investments and partnerships a smarter model than in-house development for insurance companies? The connected home’s success is predicated on partnerships. No one company can do it all. The insurance industry’s fundamental business model is based on the profitable sales of risk management instruments. Technology is already playing a role in giving insurance companies the real time data that they need to offer more aggressive rates at potentially higher levels of profitability based on the measurement of actual behaviors. The technology required to pull this together requires architectures based on the design and development of sensors, tied together via networks into the cloud and the software to do the sensor fusion and analytics. It’s a massive undertaking. By sticking to their core competency of insurance services, insurance companies can leverage the multitude of technology companies that are already providing the key pieces of IoT and can influence those companies to develop the products that they may need for future services.
What are the consumer benefits? IoT delivers accurate sensing data to insurers allowing them to base rates on actual rather than predicted behaviors. This means that lower risk individuals can pay lower premiums – not having to subsidize those who are higher risk. If an insurance company knows you have an automatic water shut off valve based on leak detection, they know your risk of flooding is negligible. Your rates go down and their pay out goes down. It’s a win-win.

Andrew Thomas, Co-Founder & CRO of Skybell
What are the consumer benefits? 
The two driving motivators around IoT products are safety and savings. Consumers will benefit as they see their premiums and costs drop with the products backed by their insurance carrier. 
What kinds of IoT companies are best positioned to work with insurers? It all boils down to impacting the bottom-line. Damage from water (flooding), fire and hail are the most common claims that impact a carrier’s bottom line. I see water sensors, smoke alarms and fast-action weather alert systems as the best positioned to work with insurers.

Jim Poole, VP Business Development at Equinix
Are investments and partnerships a smarter model than in-house development for insurance companies? 
Without a doubt.  If you look at the market, you’ve got a lot of investment funding development in numerous different areas:  autos, sensors, weather, networks, cloud platforms, etc. The list goes on and on. Trying to do in-house development in such a dynamic environment is a questionable exercise versus utilizing best-in-breed solutions from vendors trying to fix very specific market issues.
What are the consumer benefits? IoT obviously has the potential to dramatically impact the insurance industry. If self-driving cars become a reality, the impact on accident rates would dramatically change the demand for CURRENT insurance products. However, insurance is one of the few products that can more easily adjust to the needs of consumers. Just because I don’t need the same type of insurance I had when I drove a car every day, doesn’t mean I don’t need insurance for when I decide I don’t want to take a self-driving auto.  Also, more generally, insurance often deals with trying to model scenarios that are potentially BETTER understood with the aid of IoT.  For example, flood or fire insurance that might be better tailored for users if we can lower the incidence of accidents which occur due to product failures versus less predictable “acts of God”, such as storms or forest fires.

Eric Forti, Business Development Manager at Jarden
Partnerships and investments or in-house development? Product development isn’t a forte for most insurance companies and therefore is a likely stumbling block for them successfully navigating the space. There are many companies out there that specialize in product development that would ultimately offer better experiences for consumers.
What are the consumer benefits? Having IoT devices in homes could make trends visible to insurance companies and allow them to educate consumers in new ways (e.g. there are a lot of burglaries in homes within X miles of yours and they’re trying windows first. Make sure they’re locked!) I guess another way of looking at this is, if the insurance companies incentivize consumers to install IoT devices what are the drawbacks for a consumer?
Does B2B/industrial IoT or B2C/consumer IoT hold more promise for insurance companies? I think both the consumer and the businesses have an opportunity to benefit. Utility companies could install monitors and kill switches then strike deals with insurance companies as a result. This is a clear financial benefit for the businesses providing incremental services. Ultimately if the insurance company’s costs go down, the consumer should also see a savings. Outside of a financial benefit there are opportunities for the consumer to get better service as a result of being connected through IoT. When companies learn your habits they can point out unwanted deviations and/or offer you products and services to enhance your experience.