How life insurers can benefit from the IoT

The IoT is good news for life insurers.

By Martin Stewart : 8th of February 2020

The Internet of Things (IoT) is the network of connected smart devices, from fitness watches to smart kettles, that can gather and share data on a massive scale – and it’s growing fast. There were 26.6 billion active IoT devices in 2019, a number which is predicted to reach 75.4 billion by 2025.

The data collected by the IoT is extremely useful to insurers, allowing them to more confidently predict risk. For instance, it’s possible to use a Google Street View image of a house (and the car outside) to make all kinds of impressively accurate predictions about its inhabitant, from their income level to their likelihood of getting in a car accident.

The global IoT insurance market is
expected to be worth USD42.76
billion within 2 years
The global IoT insurance market is
expected to be worth USD42.76
billion within 2 years

That’s why, while the IoT has huge implications for everyone, life insurance certainly stands to benefit. In fact, the global IoT insurance market is expected to be worth USD42.76 billion within 2 years.

For life insurers, in particular, there’s a whole host of health-related data to rely on.

That includes:

  • Steps per day
  • Heart rate
  • Blood pressure

This can be used by life insurers to get a quick and accurate picture of a customer’s health. That’s incredibly valuable when it comes to calculating risk. Steps per day alone is a highly accurate predictor of mortality.

This sort of thing is easy to make use of. For example, U.S. life insurance specialist John Hancock announced in 2018 that all new holders of their life insurance policies will be required to wear an Apple Watch.

The watches are heavily subsidised and can be further subsidised (all the way to zero) if the users are especially active. The result? A 20% increase in physical activity among policyholders and a 68% reduction in life insurance claims.

The IoT is good news for life insurers.

They can:

  • Access more complete and accurate data
  • Qualify customers more quickly
  • Develop new products and models based on the data collected
  • Complement existing underwriting with more data
  • Communicate better with customers and cultivate ongoing relationships
  • Beat fraud with accurate sensor monitoring
Wearable devices provide data to
show healthy habits & recent
attempts to improve health
Wearable devices provide data to
show healthy habits & recent
attempts to improve health
And customers benefit, too.
Their advantages include:

Increased insurability. For example, in the past, overweight customers would have had very poor options for life insurance. However, with wearable devices they can provide more data to show healthy habits or recent attempts to improve their health, allowing them to access better plans .

A closer relationship with insurers. Closer sharing of data, along with tools like communications apps, can bring insurers and their customers together and allow more regular communication.

The incentive to make healthier/safer life choices, and possibly receive discounts on products that can help them do this.

A faster path to insurance. Healthy and responsible customers can simply submit their IoT data to life insurers and get fast-tracked to a plan.

How can life insurers make this happen?

Moving to an IoT-based approach might be easier than you think. Here are some simple steps you can take:

1. Develop a plan and choose a direction. Decide which areas you want to focus on and whether your customers would be interested in using more IoT devices.

2. Build the right partnerships early on. These could be with the manufacturers of wearable devices, for example.

Customer data is a risky and
sensitive area. Make sure
you’re taking precautions
Customer data is a risky and
sensitive area. Make sure
you’re taking precautions

3. Consider data privacy laws and other regulations. Customer data is a risky and sensitive area. Make sure you’re taking the right precautions and create clear policies from the start.

4. Prioritize security. Data breaches are all too common, and losing customer data to an attack can leave your reputation in tatters and result in serious legal damage.

5. Don’t stop at collection. Gathering data is one thing, but you also need to consider how to store that data, integrate it into your systems, and connect it to your overall strategy to really reap the rewards

Whether you’re looking for an innovative platform to support business growth, you’re over capacity and need to outsource a project, or you’re in a jam and need a rapid solution, Axe is ready to support you.