• Learn how insurers can realize the potential of the Internet of Things for their risk calculation and claims management.

• IoT applications not only make insurers more efficient, but also enable them to get closer to their customers.

• Initial projects such as the "Mitipi" burglary protection system developed by Helvetia and Zühlke are already being used.

The future of insurance is highly connected

More accurate risk calculation; process automation; closer customer contact: using the Internet of Things (IoT), insurers can improve their existing products – and enter new territory at the same time.

To assess risks as accurately as possible and at the same time be able to respond individually to customer needs, an insurance company primarily needs a good data basis in order to create transparency. In today’s world, this is often already available: in industry, for example, sensors record production data from machines; in the personal area, the Fitbit Tracker registers data about your own body.

But how do we make use of this information? By harnessing the power and the possibilities of the Internet of Things. IoT applications are not child's play, but they can be implemented by small and medium-sized insurance companies with a reasonable investment. The effort is worthwhile, because the technological leap opens the door to optimisations and new developments along the entire value chain.

It all begins with the insurers' core business: the calculation of the risk. For underwriters, who often have to struggle against a torrent of information, IoT applications can help in designing a policy that is fair for both customer and insurer. One example is the internationally active insurer HDI. This company has a tool called ARGOS that collects data from weather stations and seismographs and uses it to calculate the probability of natural disasters. This is useful when insuring business premises, for example.

The Internet of Things also has great potential for automating damage management and thus reducing costs. Thanks to an application that also relies on data from weather services, the company Wetterheld can pay out storm-loss compensation to affected customers quite straightforwardly. Extensive on-site investigations are unnecessary. Automated tools such as these also scale well. Once set up, taking on small customers is also worthwhile. A football club can insure its club fête against rain just as a large farmer can insure his fields against drought.
 

The innovative Israeli startup Parametrix has created a new area of business out of these possibilities. Parametrix offers fully automated insurance for business interruptions due to IT problems. If a company's cloud services fail for around an hour, Parametrix will know in real time thanks to consistent monitoring and will immediately pay out a predefined loss amount. Modern flight insurance works on a similar principle: thanks to the availability of air traffic data on cancellations and delays, payouts can be made automatically.

The potential of IoT is not limited to internal processes, however. It can also be used to control the behaviour of customers – in this way, loss events can be prevented or at least reduced. One example is the use of Telematics 'black boxes' in cars, which report driving data such as speed or abrupt braking to the insurance company. This not only helps to determine fault after an accident, but also motivates drivers to behave carefully from the outset.

The Swiss insurance company Helvetia also wants to take a preventive approach. It asked Zühlke to develop a device that records how customers normally use building functions such as lights and blinds in their homes. When the residents go on holiday, the device imitates their presence – and so scares off potential burglars. Helvetia's intrusion-protection system, called Mitipi, also functions as a 'physical twin': it signifies a physical presence in the customer's home. In this way, insurance companies, which usually only have contact with their customers when a contract is being signed or in the event of a claim, can create a positive customer experience. The Internet of Things therefore not only makes insurers more efficient, it actually helps them get closer to their customers.

Given the many fields of application, the potential of IoT in the insurance industry is huge. Some pioneers have recognised this and have already implemented their first projects. For the other insurers, it is now very important not to lose touch with technological developments. The important thing here is to push ahead with your own idea and your own application in a structured and consistent manner – and never lose sight of the tangible benefits for customers and for the insurance company.