Why IoT and AI are elevating insurance to a social good

There are approximately 19 billion connected devices worldwide, and numerous industries have integrated the IoT paradigm—sense, analyze, and act—into their operations. The insurance sector has embraced this trend as well, with its most prominent application evident in auto business, commonly referred to as telematics.

 

The capability to sense events affecting the insured, transmit this information in real time to insurers, analyze the continuous data stream through artificial intelligence to understand, decide, and learn—and subsequently act—represents a remarkable opportunity to perform insurance activities better. The noble job of assessing, managing, and transferring risk stands to be fundamentally transformed by leveraging the IoT paradigm.

 

Numerous IoT-driven solutions exist across various insurance segments beyond the widely recognized automotive telematics, many of which have generated remarkable success stories accompanied by robust returns on investment.

 

Ting is enabling insurers to mitigate fire risks within their homeowner insurance portfolios proactively. US Insurers has already sent to their policyholders over one million devices, designed to be plugged directly into an electrical outlet. Upon detecting an electrical fault, Ting immediately notifies the homeowner and arranges for an electrician to resolve the hazard before it can develop into a fire. Dozens of insurers are expanding this preventive safety initiative across their portfolios, with some—including Nationwide—already highlighting its compelling business case.

 

HSB maintains continuous connectivity with tens of thousands of sensors deployed across commercial properties, enabling insurance programs and carriers to effectively mitigate water-related risks. Its real-time escalation procedure, triggered whenever a sensor detects an issue, has consistently achieved an average reduction in expected insurance losses of $8 for every dollar invested in the IoT initiative.

 

HDI has improved the insurability—both availability and affordability—of lithium-ion-based energy storage systems. Ongoing connectivity with battery management systems and the AI-powered monitoring solution provided by their partner Accure "not only ensures transparency in assessing battery health but also substantially reduces risks related to performance deterioration, system failures, and fire incidents."

 

The mutual insurer Relyens, European leader in Medical Malpractice, is offering IoT and AI based prevention services to complement his risk transfer product.

 

Hundreds of surgery rooms have already been connected,  and this enables hospitals’ ability to monitor and analyze any surgical or post-operative care variations and have higher success rates when it comes to reducing these variabilities and reducing gaps in surgical practices.

 

Relyens, a leading European mutual insurer specializing in medical malpractice, now provides IoT- and AI-driven preventive services to enhance its traditional risk-transfer offerings. Hundreds of operating rooms have already been connected, empowering hospitals to monitor and analyze variations in surgical procedures and post-operative care. This approach has substantially improved hospitals’ ability to minimize procedural inconsistencies and address gaps in surgical practices.

 

The IoT Insurance Observatory—a think tank that has engaged over a hundred international insurers and technology companies across its nine annual editions—has closely observed these IoT-driven initiatives. During our peer discussions, senior insurance executives of insurers at the forefront of IoT integration have shown a growing consensus about the transformative impact of a holistic and integrated application of the IoT paradigm along the insurance value chain.

 

This structured and coordinated application across insurance functions reduces anticipated losses, optimizes pricing accuracy relative to risk, and enhances claims processing efficiency and effectiveness. These impacts enable many policyholders to benefit from adequate coverage at lower premiums, while insurers preserve the technical equilibrium of their portfolios.

 

Consequently, connected insurance serves as a social good, enabling insurers to broaden the availability and affordability of coverage while maintaining satisfactory profitability.

 

A prime insurance case exemplifying this holistic approach and full organizational integration is that of South African insurer Discovery. Over three decades, Discovery has perfected its Vitality initiative, effectively encouraging life and health policyholders toward healthier behaviors through  tailored recommendations and tangible rewards for effective participation in suggested activities. This strategy has delivered outstanding economic outcomes, shared substantial value with customers, and generated significant positive externalities for society as a whole.

 

Leveraging the IoT paradigm presents an exceptional opportunity for insurers across all business lines to enhance their assessment, management, and transfer of risk.

 

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By Matteo Carbone, director of the IoT Insurance Observatory and Chairman of Net Insurance’s Innovation Advisory Board