We take a loot at how the loT and 5G is redefining so many aspects of business globally, with significant impacts on insurtech and shaping future trends
In terms of risk assessment, incentives, underwriting, and claim responses, a lot has changed in the last decade.
Much of this can be attributed to the IoT (internet of things), as popular wearables, connected devices, and sensors transmit important data to insurers, forming insights, client profiles, and risk assessments that can accurately forecast the future.
Creative incentives, made more user-friendly through gamification technology, go hand in hand with data collecting and continual customer contact. This remarkable transformation is only the tip of the iceberg for the insurance business, which has never looked more active.
The loT and legacy systems
But, with insurtech accounting for only 2% of the global insurance market, to what extent are IoT devices impacting events – and which areas have seen the most adoption? What are the largest issues insurtechs have when it comes to handling the data they collect, and why?
The volume of data being collected, according to Mark White, Senior Manager – Financial Markets and Fintech at Telehouse Europe, is the largest problem. “Insurtechs recognise the significance of data and are increasingly looking to use it to help them make better decisions.” The issue is that the sheer volume of data can quickly become overwhelming, and many organisations lack the necessary IT infrastructure to handle it.”
IoT changes and influence
With this in mind, it’s critical to comprehend how much IoT devices are affecting insurtech events, as well as which regions have witnessed the most adoption. ISG’s regional director for Banking, Financial Services, and Insurance is Peter Heywood. He feels that the transformation has been ongoing for some time, with the most significant changes occurring at the data management level.
“IoT in insurance isn’t new,” he argues, “but the name IoT is.” For more than a decade, blackbox insurance has been regularly employed for both personal and fleet purposes. Smartwatches, for example, are more recent examples of personal technology and electronics. The potential of IoT sensors to be integrated with low-power sources, with high resolution and accuracy, and at low cost which are driving the wider adoption and integration into the insurance chain.”
Security, wearables, and personal data concerns
The chances for crime grow as the digital footprint grows, and cyber-attack has become synonymous with this age of rapid digital revolution. The stakes have never been higher, as firms receive real-time data straight from customers and hackers devise new ways to breach them.
IoT security, according to Mike McGrath, Senior Lead Penetration Tester at Bridewell Consulting, needs to be taken seriously, especially in this age of rapid innovation and disruption. “When you consider the applications in which IoT devices are being more frequently employed, there are major consequences if the equipment used are not secure.”
“There are a few procedures that businesses should take to ensure that the IoT devices they’re installing are secure. First and foremost, they should consider restricting physical access to the devices, ensuring that only authorised individuals have access. Unauthorized physical access can result in malicious changes to the device’s configuration or the installation of malicious firmware.
“They should also alter any default passwords and credentials provided by the manufacturer, and if the device supports it, enable multi-factor authentication.” It’s also a good idea to turn off any unnecessary protocols, especially those that send unencrypted data (Telnet, FTP), as this can be easily intercepted and manipulated. Disabling Universal Plug and Play Protocols (UPnP), which are frequently enabled by default, is also a good idea. These allow devices to make changes to your router, giving them access.
Challenges in loT management
Better regulation, according to Heywood, is at the heart of the issue, and he identifies seven areas where reform is needed. He claims that until these adjustments take place, the issues would remain. He lists four main aspects, which include:Regulation, Cost of data, Volume of data, Model explainability and basis.
According to Haywood, “there’s also a growing focus on the alignment of inclusion and diversity in these models.” “This entails ensuring that the models used for analysis are ‘basis free,’ meaning that they aren’t harming (or helping) specific groups based on external factors like demographics.”
Technological breakthroughs in insurtech
As technology advances, connectivity will play a key role in transforming insurtech into a mainstream service, transforming it from a 2% market share to a dominant force in the sector.
“5G will provide several benefits for Insurtech companies, including lower latency, which will assist shorten transaction and settlement times,” White says. It will also make AI adoption easier, allowing for more personalization and better customer service.
“When a new wireless communications technology is released, the amount of data used typically grows dramatically. Backbone networks will be put under more strain as a result of the increased data traffic, and many will need to find ways to boost their available bandwidth and, most likely, data centre capacity.”
However, Chris Gill, Over-Director C’s of Risk and Insurance Markets, believes that 5G’s increased connectivity will merely enhance the services provided by insurtechs rather than play a significant role in increasing adoption. Legacy insurers, he adds, should re-evaluate their data systems to ensure they are appropriately equipped.
The IoT in a decade
It’s difficult to forecast what the future of the IoT in relation to insurance will look like with such quick developments and new technologies soaring. However, the latest advancements in augmented and virtual reality, gamification, and the Metaverse are all expected to play a part in this increasingly complicated society. The next 12 months, according to Gill, will be critical in determining which routes insurance will take.
He believes that if commercial insurance companies can successfully link and use the power of their customers’ IoT, they will be able to obtain dynamic risk data and, as a result, create a greater understanding of their customers’ risk quality.