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The Internet of Things is a concept that assumes that all devices will be able to communicate with each other through an Internet connection. According to Gartner’s analysis, in 2020, the total number of such devices is expected to reach 20.4 billion.

Insurance providers can start using the IoT devices that have been already installed in cars, homes or smartwatches and other so-called wearables. The challenge remains to learn what data to collect and analyse and then how to use it. This is one of the areas where insurers should try to create new ecosystems or join existing ones. To give you an example, one of the oldest North American life insurers, John Hancock, replaced its traditional offer with interactive life insurance that uses data coming from wearables to reward those clients that make healthier choices regarding physical activity and nutrition. Such a service is offered at no additional cost, and it gives its clients access to professional fitness and nutritional resources and sets personalised health goals.

Insurance providers should treat cybersecurity as both a threat and an opportunity. It’s risky because they store a massive amount of sensitive data about their clients and especially during systems upgrade or switching to cloud services, insurers should pay particular attention to data security.

On the other hand, the increasing usage of digital services by both companies and private individuals means that they need to be protected against possible losses which can be an opportunity for insurers. Juniper Research estimates that in 2019, there will be over $2 trillion losses caused by cyberattacks. In addition to providing the insurance policies, it’s possible to create a system of services covering the entire value chain: diagnostics and support in the event of an attack. At least some Insurtech companies are well aware of that. For example, Coalition offers insurance coverage for network breaches, employees’ data and password breach, ransomware, privacy liability, business interruption, fines, etc. In addition, their clients also get cybersecurity tools. In case of an incident, they offer professional support during and after it.

The currently used methods of calculating the risks usually take into account metric data, not real consumer behaviour and activities. Most insurers don’t measure all the data about their clients that is currently available. In addition, according to the World Insurance Report, 37% of customers are willing to share additional data in exchange for a personalised offer and better protection. What is more, 55% of them are able to pay extra for risk-prevention services.

The use of available data affects the possibility of personalization of products on a massive scale. For example, someone who is chronically ill but has a healthy lifestyle may be at lower risk than a person who does not engage in any physical activity or drives a car dangerously. Insurers who make the most of the new data will be able to better respond to customer expectations and better estimate risk.