How IoT Is Transforming the Insurance Sector
You may be wondering how IoT can be applied to the insurance industry. Is there anything to track? Would it really make a significant impact? How does the application of IoT devices help the company and the customer?
Typically, insurance companies are known for using non-direct indicators, past trends, and long-term analytics to assess a customer’s risk profile, which ultimately dictates how much they pay for their insurance. For example, auto insurers traditionally rely on indicators such as age, address, credit rating and driving records to assess risk and insurance price.
But these outdated techniques are based on past assumptions and not on current driver behaviour. Some drivers may be paying less or more than they should for their insurance based off assumptions from outdated statistics. IoT devices can offer relevant and accurate data on driver behaviour and the use of a vehicle, such as the speed at which the vehicle is being driven, how often the vehicle is driven at night where there may be an increased risk of crashes and accidents, etc.
With the continuous advancements in IoT devices and technology, some sensors can even detect shock and vibration to alert insurers when there are erratic movements as well as speed, distance, time, and location of the vehicle in real-time. This vast range of accurate data provides a huge opportunity for both drivers and car insurers to prevent accidents and assess a driver’s risk profile in a fair and accurate way. This is a simple example of how IoT can increase accuracy, efficiency, and productivity for insurance companies.
Better Insurance Rating Models
IoT can improve the risk assessment process by using real-time data instead of historical data and can bring new and insightful types of data to the business for calculating risk. For example, with aircraft turbines one of the most important factors that determines insurance price is the number of cycle hours. However, with the introduction of IoT technology, more relevant factors can be tracked such as the amount of time the engine is idling and which throttle it is in, as well as the temperature and humidity levels the engine is being exposed to. These factors all contribute to an engine’s longevity and its level of risk of breaking down.
Property & Causality (P&C) Insurance
Commercial P&C insurance protects businesses and organisations from loss and damage. This could be anything from business physical assets to worker health & safety risks whilst working on site. Business items can be very expensive and are therefore insured with large premiums if lost or damaged. However, with IoT these items can be tracked and monitored to reduce the risk of loss and therefore benefit from reduced premiums.
In addition, IoT can enable companies to protect workers better and thus reduce claims for health and safety related issues. For example, workers who have to work in difficult locations such as oil rigs or heavy plant facilities, can be protected with sensors that can warn them if they walk into dangerous zones where there is an increased risk of injury. Insurance claim health & safety pay-outs can be very large and therefore any way insurance companies can reduce these risks and losses with IoT will be very beneficial.
Prevention of Loss and Damage
Any company that sells products will naturally lower their insurance costs by using reliable and accurate tracking tools, as they are less likely to suffer loss and damage.
Risk data has always been at the heart of insurance and partnering with companies like Findaa can mean better data. In turn this can lead to better customer service, better product differentiation, improved business models, and therefore attract more customers. It is predicted that people will own more than 50 billion networked devices by 2025, which will offer new ways of assessing risk and tailoring pricing with precise real-time data. This will allow insurance companies to place more focus on prevention than ever before. If you’d like to know more about IoT, contact us at firstname.lastname@example.org
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