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Insurance in the Democratic Republic of The Internet of Things

Technology scholars occasionally refer to the “Democratization of Technology”.  This refers to the phenomenon of technology becoming increasingly accessible to more people.

The recent rise of the Internet of Things  is a classic example, and has important implications for the practice of insurance.  Insurance-Canada.ca will be sponsoring a series of upcoming webinars on these implications.

In the beginning: “Things” went better with Coke

While the modern internet has focused on primarily on people accessing information resources, there has always been some interest in ’things’.

In 1970s, some Carnegie Mellon University folks modified a Coke machine to use early internet protocols allowing users to check the inventory and determine if the drinks were cold (you don’t want to walk hundreds of feet to pay 10 cents for warm coke, after all).

In the early 1990s, the ‘researchers’ modified the connectivity to commercial internet protocols and added machines in far flung places, like Wisconsin and Australia. (You can see a report written from the perspective of the Coke Machine here.).

How it works…

At the Insurance-Canada.ca Executive Forum in September, Celent’s Donald Light gave a brilliantly succinct overview of how the IoT works. The following is summarized from his Report on the IoT and Insurance.

Sensors are the core elements in the Internet of Things.  Embedded devices monitor activities in their environment and transmit data (lots of data) to storage areas.  These data can be any media that can be digitized.

These data stores interact with analytic engines to provide information to humans and to machines.  In the latter category, the analytic engine can exercise control over sensors and effect changes in the device (e.g. “Turn off the water”).

All this was just interesting, until…

For a few years, insurance practitioners, analysts, and media (present company included) were following the IoT with importance set to ‘normal’.  Telematics/UBI was the implementation of IoT that seemed to have the biggest impact.

That’s when the technology democratization phenomenon kicked in, culminating in the Las Vegas Consumer Electronic Show (CES) earlier this month.

John Abell, Senior Editor at LinkedIn, posted on the IoT products, services, and suppliers at CES.  With minor editing, this could be a list of “Things that Could Disrupt Insurance Soon”.

Abell says that normally ‘flavour of the month’ releases at CES are advance death knells for the products hyped.  Example:  3D TV which was launched at the show twice, and is still dead.

What’s different?

Abell writes:  “The Internet of Things is different. It’s tech democracy in action …[it] will be inherent and invisible and pervasive.”

Why?  According to Abell, the IoT is infrastructure, and “We don’t think about infrastructure. It isn’t sexy.”  As a result, it will become part of our world because we want what it does.  Just like the other Internet did.

As for Insurance…

The implications for insurance come in 4 categories:

•    Physical – Homes, commercial property, infrastructure, technology
•    Mobile – Cars, trucks, airplane
•    Human – fitness, disease, injury
•    CyberRisk – the risks associated with IoT and all connectivity

There are new exposures, threats to existing revenue, opportunities for new revenue.  But only for the prepared insurers and brokers.  Who will these be?  The clock is ticking.

More information available …

The Insurance 2025 Study Group – I2SG (formerly know as the Insurance 2023 Study Group) will be discussing the impacts of the first three over the next few months. The group has decided to open these discussions and welcomes your participation.

The first webinar will be this Thursday, January 22, 2015 and will focus on Physical Things and the impact on underwriting, marketing, claims, and risk management.

See the information page for details and registration.

Insurance-Canada.ca is sponsoring the event and I have the privilege of facilitating the session.  If the group behaves in its typical manner, I will be lucky to get a word in.

Hope to ‘see’ you there.

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