The Internet of Things and Life & Health Insurance

Can an Old Industry Learn New Tricks?
by Donald Light, May 14, 2014
Industry Trends
Asia-Pacific, EMEA, North America

Abstract

The Internet of Things will change the life and health business.

The world is changing. It is becoming more connected. People, places, and things are using these connections to exchange an exploding amount of digital information and data. This digital stuff is stored and analyzed, and then yields predictions, feedback, and control.

The Internet of Things (IoT) has three, interdependent components: things with networked sensors, data stores, and analytics engines.

“The value creation of the IoT lies in what connects the three components: one, the internal state and external status data and information, which can provide a much more accurate, and sometimes previously unavailable, picture of the hazards and risks of what is being insured; two, analytically driven findings — some looking backward to improve pricing, underwriting, and claim decisions and others looking forward to changing behavior and performance; and three, feedback and control processes to command or request things to change their loss-related behavior and performance,” said Donald Light, Director of Celent’s Americas Property/Casualty Practice and author of the report.

This report discusses how The IoT will change every part of the insurance value chain: product design, pricing, underwriting, service, and claims.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

Introduction

2

How Will the Components and Connectors of the Internet of Things Change Insured Losses?

3

 

Things with Networked Sensors

3

 

Data Stores

5

 

Analytic Engines

6

Insurance and the Internet of Things

8

 

Objects of Insurance, Exposures, Hazards, and Risks

8

Things, Sensors, Hazards, Risks, and Lines of Business

9

 

How the Internet of Things Will Help Insurers Price Correctly

9

What Can Limit the IoT’s Ability to Reduce Losses?

11

 

Operational Contingencies

11

 

Root Causes and Feedback Contingencies

11

The Downside of IoT: Making the World More Dangerous and Intrusive

12

 

Dangerous Failures

12

 

Intrusions

12

The Internet of Things and the Insurance Value Chain

13

Conclusion: Could Insurance Lead the Way? Will Insurance Lead the Way?

14

Leveraging Celent’s Expertise

16

 

Support for Financial Institutions

16

 

Support for Vendors

16

Related Celent Research

17

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