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July 23, 2015
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The Connected World – Opportunities for Commercial Insurers

A recent article in PropertyCasualty 360, The Internet of Things: Insurers must prepare for disruption, customer impact, highlights the imperative for insurer strategies that address the emergence of the Internet of Things (IoT) and how it changes customer behaviors and their views of risk. The article predicts that as consumers have more access to data through their connected devices:

The IoT will fundamentally change what consumers know, when they know it, and how they interact with businesses that serve them. It will change the consumer dialogue about risk, and shrink consumers’ perceptions of the boundaries of “traditional, insurable” risk.

So far the P&C insurance industry has focused its IoT thinking on the connected home, wearable fitness devices and usage based car insurance (UBI). Many insurance carriers typically leverage third-party services for discounts based on IoT data. Others use it to create new products and services.

The automotive, healthcare, manufacturing, oil & gas, retail, telecommunications and transportation sectors have taken the lead leveraging IoT to change their business operations and products. They have already improved results by managing vehicle fleets with connected car data, building smart factories with centralized systems monitoring security, HVAC and sprinklers. Others optimized their supply chains with sensors that track the quality and location of merchandise.

So where is the insurance industry in regards to usage of its commercial customers’ IoT data, or with making internal IoT investments of its own?

Until recently, the insurance industry was relatively quiet on the usage of IoT data for commercial lines insurance (outside of a few cases of UBI in commercial auto insurance). But that is changing.

For example, MunichRe and HSB are sponsoring the “Plug and Play Internet of Things Accelerator”. In the related article in Insurance Innovation Reporter, they discuss their involvement and focus on how real-time analytics from sensor data will impact commercial lines insurance.

Another recent article, 10 Big Data Case Studies gives specific examples of how some commercial insurers are combining current risk exposure data (e.g. property or business disruption) with real-time streaming events (weather, seismic, geo-location, and property profiles) for risk evaluation and insight into loss prevention.

The Connected World of Risks and Insurance

In the near term, we expect to see new analytic applications by insurers and/or brokers leveraging operational monitoring data enriched with third-party sources such as:

Providing Enhanced Risk Management Services

We also anticipate that carriers will use these public sources in combination with their own internal data for new product development, underwriting and claims processes. The insurance carrier also has the opportunity to use this information to further evaluate reinsurance needs and aid reinsurers in their evaluations. The commercial industry segment could be on a path to risk-monitored usage-based premiums, enabled by new data analyzed through a “connected risk” lens.

As insurers embark on the journey of capturing and utilizing IoT data, they would do well to remember some important guidelines. First of all, they need the right data platform to build their advanced analytic apps. At Hortonworks, we have deep experience working with companies across all industries to do that.

Insurers also need to foster the right skillsets and mindsets, encouraging their teams to embrace the disruption in order to create new value in the industry.

By beginning the first clearly defined IoT project with the right mindset and building a data platform that can capture the volume and variety of data being generated by IoT insurers, brokers and reinsurers can capture this opportunity and generate products and services we haven’t seen before in the industry.

Learn More About IoT for Insurance from Hortonworks

This blog acknowledges the security/privacy and cyber risk elements of IoT. Companies should consult with their enterprise risk management organization regarding its IoT security/privacy related usage policy.

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