The idea of an Internet of Things is not a new one. Devices that can report performance and receive instructions via an onboard microcontroller are to be found in a whole range of surprising places.
The practice is especially evident in the world of motoring, where analysis of driver behaviour and performance can inform future vehicle designs. Supply chains have also been revolutionised – now, businesses and customers benefit from up-to-the-minute information about the location and state of a particular package, thanks to sensors that record deliveries automatically. This all has profound effects on the world of commercial insurance.
In the world of commercial insurance, managing risk is crucial to driving affordability. The greater the accuracy with which insurers can monitor any given risk, the more transparent they can be with pricing. This creates a positive incentive for both the customer and the insurer – lower the risk, lower the price. In a motoring environment, this might mean staying below a certain speed at all times; in a commercial environment, it might mean installing biometric and environmental sensors around a given premises.
This streamlining process means that insurers can not only drive down their costs, and therefore their prices, but that they can turn claims around more quickly. Customers no longer need to wait for weeks for a pay-out – which can be crippling for businesses which rely on steady cash-flow.
What’s more, insurers can monitor risks more accurately when the commercial climate suddenly changes. In 2020, we saw a widespread and unanticipated shift toward home working, and a surge in demand for new kinds of technology insurance to cover the risks associated with sending data back and forth between offices and the homes of remote workers. IoT may play a critical role in ensuring that everyone is covered in a post-pandemic world.
Administrative Burden Lowered
Having access to a great deal of information can be a powerful thing – but only if that information is processed in the right way. Internet of Things has shifted the focus toward data-driven decision making, and eliminated the need to spend time and energy delving into paperwork by hand. The claim-lodging process has been simplified with the help of online services.
More data allows insurers to swiftly build a vivid and accurate picture of the risk they’re considering. This is especially powerful in the case of new industries, whose nature is not yet widely understood. Genuinely new kinds of business often struggle to insure, because insurers rarely feel comfortable with them. The Internet of Things promises to change that. This might be critical, given the pace at which technology is making all manner of new kinds of business viable: from new social media platforms to new cryptocurrencies.