Internet of Things (IoT) is a relevant trend for our hyper-connected society. A few years ago, it was estimated that on a normal day, other 127 devices are connected to the Internet each second. Moreover, nowadays, this trend is growing exponentially. Insurers cannot stop this; they can only leverage the data which comes from these connected devices or ignore this data.  

As of today, the insurance sector has exploited it more on personal lines than in commercial lines. Insurance telematics on personal auto has been out there for more than 15 years. The Italian market has achieved more than 22% of telematics penetration on the auto insurance business. In the US, the penetration is still low, but in the last two years, the market has evolved significantly. French insurers have built a success story on smart home insurance (télésurveillance services) over the same period, even in the US the experimentations are progressing, and players such as American Family are leading the pack.

We are starting to see the emerging of commercial line applications, especially in the US. However, on the commercial insurance lines – outside of the commercial auto – we are still talking about theoretical ideas and POCs, and there are only a few already commercialized products. In my activity at the IoT Insurance Observatory – a think tank that in North America has aggregated almost 30 members, including 6 of the top 15 P&C Insurance carriers as well as the leading reinsurers – I’ve directly seen this growth of the appetite of the traditional insurers for IoT applications.

The opportunity

The insurance sector has four different opportunities to leverage the IoT data on commercial lines:

• First of all, there is the opportunity to insure new risks that are emerging due to this technology, but also to insure the outcomes of IoT solutions adopted by a business owner.
• Another area of opportunity is to develop new ways to insure existing risks. Let’s think about the real-time measurement of the key drivers for the exposure of insurance coverage, such as the presence of people in an area for general liability or the inventory for theft insurance.
• IoT data (and processes based on this data) allows improving the performances of the core insurance activities (underwriting, pricing, risk management, and claims handling) for current insurance products,
• Last, there is the opportunity to sell IoT-based services.