How the Internet of Things is changing insurance

Property Causality 360

By Stuart Rose

Connected, communicating devices, often referred to as Internet of Things could be one technology to revolutionize the industry. (Shutterstock/nopporn)

Insurance companies talk about new product development and speed to market, but true innovation is rare in the insurance sector. However, connected, communicating devices, often referred to as Internet of Things (IoT) could be one technology to revolutionize the industry.
Sensors offer unprecedented access to granular data that can be transformed into assessing risk more accurately. For many insurers their initial exposure to IoT has been via telematics devices. But today sensors are used in thousands of different devices. Sensors are used in buildings and bridges to monitor for structural defects and mitigate potential losses. Life insurance companies are using the data from wearable devices like FitBit and Nike+ FuelBand to better assess the health of the life insured. And, sensors are being implanted into animals to track and identify livestock, helping insurers rate and price agricultural insurance more accurately.
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The first sensors appeared decades ago, but in the last five years two major changes have shaken the sensor world and caused the IoT market to mature. From a technology perspective, the size and cost of the devices have decreased dramatically, and Wi-Fi and wireless communications make it more efficient to transmit the data.
In an industry that’s frequently slow to adopt cutting-edge technologies, IoT is starting to make waves. To successfully leverage IoT, insurers need to invest heavily in both data management and data analytics.
Data management
Big data has become a technology buzzword, and it is at the heart of IoT. First of all, let’s consider the amount of data that automotive telematics devices are expected to generate. A telematics device will produce a data record every second. This data record will include information such as date, time, speed, longitude, latitude, acceleration or deceleration, cumulative mileage and fuel consumption. Depending on the frequency and length of the trips, these data records or data sets can represent up to 1 GB of data per day, per vehicle!
To store this data, many insurance companies use distributed processing technologies such as the Hadoop file system. Hadoop is an open-source software framework for running applications on a large cluster of commodity hardware. Since Hadoop runs on commodity hardware that scales out easily and quickly, organizations are now able to store and archive a lot more data at a much lower cost.