There are many technology trends that could impact the insurance business over the next few years, but the most potentially disruptive is the “Internet of Things.”

The Internet of Things is emerging because so many things are becoming IP-enabled, including automobiles, homes and facilities. This will also include humans through wearables like Google Glass, Apple Watch, and embedded processors in shoes and clothing. There could easily be more than 100 billion things, and billions of people, linked to the Internet by the end of this decade.

What does this mean for insurers in terms of products, services and distribution? To answer the question, consider Internet-enabled ride-sharing services like Uber and Lyft. These involve people using personal autos to pick up people and get them where they want to go. A smartphone portal allows users to schedule the car pickup, pay by credit card and track the car en route via a maps app. Moving ahead to 2020, when everything is IP-enabled, we can envision the following:

1. A car’s sensors could report all aspects of the car’s wear and tear and the position and speed of all vehicles nearby.

2. Drivers and passengers could wear clothing and watches that monitor their state of health.

3. The road and street lights could recognize each car and its speed.

4. Since an auto could be used for both commercial and personal business, an insurer would need to know whether a personal or commercial policy should be in effect at a given time. Different companies may provide the different coverages.

5. Telematics data from the car could be fed back to the insurer, which might offer a discount for good driving.

6. Billing could be intelligent and metered, taking into account premium adjustments based on vehicle wear and tear as reported by the car’s sensors.

7. Street lights could send information back to an insurer, which could increase the policy premium if the driver were to go through a red light.

Now, let’s see what could happen if the driver were in an accident:

• Clothing sensors could communicate the occupants’ injuries to their doctor or hospital, as well as to the auto insurer.

• The car could communicate damage to the insurer and auto-body shop, and automatically dispatch a tow truck.

• The circumstances of the accident could be recorded by sensors in the road, street lights, telephone poles and other cars in the vicinity, and then transmitted to the police and to the insurer.

• A request to photograph the car and answer some questions could be sent to the insured’s mobile, or his designee’s. Prompt compliance could be rewarded with a premium discount.

• All of this data could be fed to a variety of interested parties, including claims adjusters; underwriters to reevaluate the risk and price of the policy; brokers, who may recommend additional products to the insured, and the local road repair crew.

The combination of the car’s and the insured’s sensor data would create an ambient intelligence about what needs to happen next for the insured, the broker and the insurance company. The implications of all this for products, services and distribution are massive and far-reaching.


Since vehicles and residences could be used interchangeably for personal and commercial purposes, insurance products may need to be recombined dynamically to get the right mix of coverage. Perhaps some group products will have features of both commercial and personal insurance.

Claims processing, billing, pricing and other tasks would take place in real time, with rules engines handling much of what people currently do. Portals would assimilate sensor data from multiple sources and generate workflow, while continuing to interact with customers and agents. Workflows initiated from sensor data would need to be dynamically configured as events unfold. Sensor data would determine how a claim should be handled or how a policy should be priced.


Pricing would be more flexible and adjusted in near-real-time. Personal line products could be sold as events unfold, with the intelligence gathered from the sensor data indicating which sales channel to use at what time.

On the business side, commissions and payments could be tied to selling and renewing policies based on real-time sensor data. Discounts could be offered to people for making their data available and acting on it promptly, by replacing their brake pads, for example, or re-inflating their tires. As the IoT grows and evolves, so, too, will the possibilities for flexible insurance products, personalized services and micro-segmented distribution strategies. Insurers that position themselves to ride this wave will transform the Internet of Things into the Internet of Possibilities.

INNSight is exclusive commentary from Novarica.

Mitch Wein is a principal at Novarica, a research and advisory firm focused on business and technology strategy for insurers.

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