What is the Internet of Things and how does it affect insurance?

Welcome to the era of the Internet of Things (IoT). The term IoT applies to devices that link to the Internet and have the ability to gather, store and analyze data as well as create new uses and solutions for users. We highlight some interesting and important insurance-related information about IoT.

Are we in the midst of a revolution? Siemens, a multinational engineering company, believes there have been three Industrial Revolutions throughout history, marked by the introductions of steam, electricity and wired computers. The rise of the IoT marks a fourth Industrial Revolution.

We all know first-hand the impact smartphones have had on our daily lives. Surfing the internet, online banking and social media are all common activities. Apps allow us to easily access GPS directions, film and edit videos, track distances travelled and play an endless variety of games.

Technology now allows other devices to connect to the Internet, many of which could also link back to smartphones. Monitored home security systems, video baby monitors, usage-based telematics, smart vehicles and appliances, and health monitoring devices are examples of recent inventions that enhance consumers’ lives by allowing them to perform daily activities with added convenience and security.

The IoT and Insurance

IoT technology offers benefits to both insurers and consumers.

In the home and auto insurance industry, two IoT innovations that have had major impacts so far are monitored home security systems and usage-based telematics.

Usage-based telematics and insurance (UBI)

UBI devices that track driving habits benefit consumers with insurance discounts for safe driving. While traditional methods of determining auto insurance rates relied on analyzing past statistics, UBI provides access to individual driver data. Safe drivers are often rewarded with reduced insurance premiums.

Various insurance providers have started to offer usage-based insurance (UBI) to their auto insurance clients. A device is placed in a customer’s vehicle and monitors their driving habits to identify which consumers consistently demonstrate safe driving.

UBI devices typically track the following driver habits:

• Acceleration – Are you accelerating on the gas to make the next light?
• Hard braking – Are you following too close and frequently slamming on the brakes?
• Time of day – If you’re driving during 12 a.m. to 4 a.m., you could be more likely to get into an accident.

Monitored home security systems

Monitored home security systems allow you to keep an eye on your home while you’re away. The security cameras in your home send live-feed footage to your smartphone so you’re able to access this footage anywhere via the Internet.

Additionally, these security systems can connect with smoke detectors and water sensors in your home. If either of these devices are set off, your security system can alert emergency crews or take corrective action, such as turning off your water supply. Some monitored home security systems can also detect carbon monoxide in your home.

Other examples of recent innovative IoT technology include: appliances such as washers and dryers with Wi-Fi capabilities that users can control from their smartphones; vehicles that notify emergency response teams or the police if they are involved in collisions or are stolen; and digital pills that are ingested by patients to provide an “inside” look to help their physicians examine their reactions to prescribed medications.

While the IoT presents numerous benefits, data and security concerns have been raised. The central feature all IoT devices have in common is they rely on the Internet. Recently, Internet hacking has been on the rise, with attackers breaking into systems such as baby monitors and webcams.

Protecting your data

Here are some steps you can take to safeguard your personal online data:

• Change your passwords frequently and do not use default passwords.
• Always update your computer and phone software to the latest operating system. We highly advise that you update your software consistently as hackers will often have figured out how to attack previous operating systems, but may have yet to infiltrate the latest software.
• If an attacker is able to gain access to your computer, they likely will be able to access all the information you have from any IoT devices you utilize, since most of these devices link back to your email. Therefore, it is very important to yourself against Remote Access Trojans (RATs), which are viruses that can invade your computer and take control. Once hackers have invaded a computer by using RATs, they can control the computer as if they were sitting in front of it. Personal information can be accessed and devices such as webcams can be activated and controlled.

The IoT era is an exciting time and holds strong potential for ongoing innovation. Contact a BrokerLink broker for more information on how we can provide you with insurance coverage to meet your specific needs.