Insurers urged to make better use of IoT to drive risk prevention for clients

A new report by the Geneva Association says that data provided by the internet of things (IoT) has huge potential to better mitigate risks and encourage less risky behaviour, and urges insurers, tech companies and regulators to work together to ensure the IoT can be become a bigger part of insurance risk prevention services. The report, titled From Risk Transfer to Risk Prevention – How the Internet of Things is reshaping business models in insurance, says the IoT has the potential to offer major benefits to both business and retail insurance buyers. It looks at the ongoing shift from traditional risk transfer insurance mechanisms to technology-enabled risk mitigation and prevention services that can be enhanced by IoT data. Based on more than 60 interviews with insurers, technology companies, startups, global organisations and leading academics across all insurance business lines and geographies, the research finds that IoT data is making it possible to prevent risks faster, more effectively and with more precision. But it says that while the IoT has been identified as a boost for risk prevention services attached to insurance, there is still no consensus on how to translate this into sustainable solutions that can benefit insurers, technology providers and their customers. This is where stakeholders need to come together, it adds. Isabelle Flückiger, the Geneva Association’s director of new technologies and data, and lead author of the report, commented: “Data provides a critical path to more affordable insurance coverage and to ‘insuring’ previously uninsurable risks through prevention. The IoT is a fundamental enabler of this and cannot be ignored by the insurance industry. Insurers should also focus on how to translate the use of IoT-based risk prevention into sustainable business models.” A research brief on the study says that risk reduction for insurance customers can either be encouraged directly through real-time risk mitigation solutions, or indirectly by promoting safe behaviours over a longer period. It adds that although such prevention services are not new in the insurance industry, ways to prevent risk are changing through the IoT. “The IoT allows risks to be better managed. This can be seen as the very essence of the evolution from pure risk transfer to a ‘prescribe and prevent’ scenario,” states the research briefing. Real-time risk prevention is most mature in business cover, driven by the loss-control culture present in commercial insurance, the research finds. Field inspections by engineering teams are well established and enhancing this work with new technologies seems like a natural step, it adds. The report says insurers also have a role to play in promoting less risky behaviour through creating awareness of current risk levels, suggesting changes in behaviour and then incentivising that behaviour. “Raising awareness of risky behaviour and identifying ways to change it are not enough. There is a need to proactively incentivise people to instigate real and sustainable changes in their behaviour through rewards,” it states. This type of work is most mature in life and health insurance, but the report notes that IoT data is being used in commercial lines to enhance the activities of loss-control teams and provide periodic safety insights to risk managers and supervisors. The managing director of insurance thinktank The Geneva Association, Jad Ariss, said: “Our report showcases the tangible impact IoT risk prevention has in improving – and even saving – lives. Although commercial lines are more advanced in rolling out these technologies, there is convincing potential in personal lines as well, with outcomes like fewer auto accidents and damage to people’s homes. The case studies in our report, of insurers who have implemented successful IoT initiatives, should inspire the whole industry. It is customers who will benefit most from this evolution.” Matteo Carbone, founder and director of the IoT Insurance Observatory and co-author of the report, added: “The world is now hyperconnected. Insurance of the future will use data to enhance customer experiences, impact core insurance processes, create new knowledge and improve sustainability. There are already pioneers in this space and their stories demonstrate the powerful and increasing role of IoT data in better risk prevention.” The Geneva Association’s first New Technologies & Data Conference will take place virtually on 1 June. It will feature the report’s authors and explore the megatrend of IoT risk prevention in insurance. The conference will have separate sessions dedicated to P&C and life and health businesses.

Insurers urged to make better use of IoT to drive risk prevention for clients

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