The Internet of Things (IoT) will connect everything with everyone in an integrated global network, bringing about the Third Industrial Revolution. With the dataisation of our bodies, ourselves and our environment, there will be a continuous stream of data that can be used by those who are able to capture the information.
As a result, it will transform all types of insurance, as well as impacting on you as a consumer. Although this may sound like science fiction, the use of telematics, wearables and home automation means that the age of the IoT is fast upon us.
Personally I counted 32 devices with internet connections in my home and they are all packed with sensors. In fact, it is estimated that there are 100-500 sensors in houses today. I am sure if you counted your own devices it would be the same, because it is not just our phones and computers any more. There's also digital radios, games consoles, e-book readers, next generation set-top boxes, alarms and heating thermostats – the list itself is potentially endless.
Thinking outside the home, British Airways has trialled a happiness blanket that monitors passengers' relaxation patterns to help shape how service is delivered on board. In addition, Cisco Connected Athlete turns the body into a distributed system of sensors and network intelligence, so that the athlete becomes a wireless body area network.
However, these initiatives are just the tip of the iceberg. Gartner estimates that there will be 26 billion connected sensors – excluding PCs, tablets and smartphones – by 2020. This will make the whole IoT industry worth an estimated $7.1 trillion, according to IT research agency, International Data Corporation.
When applied to the insurance sector, the amount of cheap data generated by the IoT will enable insurers to deal with individual segments and people. For the first time, insurers could potentially know more about their customers than the customers know about themselves, and then use this information to specifically target services and products to individuals and their needs.
The benefits of such an approach to technology were highlighted by the former head of Facebook's Identity Product Group, Sam Lessin, who said: "The more you tell the world about yourself, the more the world can give you what you want". However, there is also a potential flip side to this, with the possible creation of an uninsurable underclass, where a little thing an individual is unaware of makes them a bad risk.
Already the IoT has had an impact on the insurance industry through telematics. Manufacturers are well ahead in this arena with the adoption of sensors for everything from adjusting seat positions and mirrors to seeing whether the car recognises a particular individual.
But such a world of discrete systems is not the future. Just as telematics started with discrete ecosystems in terms of black boxes that were soon replaced by a cheaper better ecosystem on a mobile app, so the future is the creation of connected ecosystems all talking and integrated together.
The driverless car is such an ecosystem, and one which is now legal on our roads. Earlier this year, an Audi A7 took itself on a 550-mile road trip from San Francisco to Las Vegas to attend the Consumer Electronics Show. This shows that driverless cars are coming and this implementation of the IoT will be on our streets and on our insurance books in the next couple of years.
Therefore what will the impact of the unstealable car, automatic accident prevention and complete driver biometric data be on the traditional motor insurance industry? Start combining this with other data from the road, our homes and other individuals, and there are no limits to the sensors this technology could provide.
About the author
Chief Technology Officer - SSP Insurer Division - “I'm interested in change and the way that our solutions can drive innovation and excellence across the industry. We live in an unprecedented time of scale, where insurers’ daily interactions with their customers have gone from thousands to millions. My focus is on helping the insurance industry harness this new world and all the opportunities it brings.”More content by Kevin Gaut