for a much lower premium and will qualify for a
massive safe driver discount. Will connected cars be
the ticket to replacing individual or company policies?
DRIVING LIKE A GIRL
You may read this and think I’m being sexist,
but the insurance industry has notoriously charged
teenage male drivers much higher premiums than
their female counterparts. In 2012, however, the
European Court of Justice passed the “EU Gender
Directive” that stated men and women must be
offered the same quote if their circumstances are
In response, Drive Like a Girl, a UK-based,
telematics car insurer, has used little black boxes
to record driving behaviors and discern whether a
driver is driving with the profile of a 17-year-old girl
regardless of age, gender, occupation, etc.
Telematics allows an insurer to provide lower
rates accordingly. So, you don’t actually have to be a
17-year-old girl to catch a break on your insurance;
you just have to drive like one!
The EU ruling is only one factor fueling the
massive growth of global insurance telematics
subscriptions, expected to grow 81 percent from
5. 5 million at the end of 2013, to 107 million in
2018. More consumers want to take insurance
underwriting into their own hands.
The United States doesn’t have a similar ruling
on the books yet, but some companies, such as
Progressive, are relying on the technology.
More than one million drivers have chosen to
install that company’s device under the wheel,
which allows Progressive to analyze individual
driving habits and track projected savings, allowing
a totally personalized rate for the driver.
The emergence of mobile apps and enhanced
customer experiences through the use of technology
in order to improve customer retention are
additional reasons for this growth.
IMPACT ON HEALTH
Wearable devices such as smart watches or
wristbands allow employees and consumers to
say, and prove, that their lifestyles are low-risk.
Fitness junkies and professional athletes are already
commonly using this technology to monitor heart
rate, stress levels, sleep schedules and calories
burned. But the next logical step is to use these
devices to qualify for better employee health
insurance or personal health insurance discounts.
According to research from the Henry J. Kaiser
Family Foundation and the American Hospital
Association’s Health Research and Educational
Trust, the cost of employee health insurance is still
increasing faster than wages and overall inflation.
Currently, the average price for a single worker
is $6,025 and the average annual premium for a
family plan rose to $16,834. But with the Affordable
Seismic changes are afoot in the insurance world
with new technological developments stemming
from the rush to the Internet of Things (Io T).
According to a report from McKinsey Global
Institute, Io T has the potential to unleash as much
as $6.2 trillion in new global economic value
annually by 2025. But what value will it bring to the
insurance industry and, more specifically, to their
customers? Let’s take a look at a few common areas
of insurance — automotive, health benefits and
commercial real estate — and see what the future
Do you have the same driving patterns as your
friends, family and colleagues? It’s highly unlikely,
but until now, you’ve had no choice but to pay the
same rates and premiums, based on the average risk
level. If you are a safer than average driver, you end
up paying to cover those at greater risk. Is it fair and
is this the best system we can have?
One in five new cars already collect driver and
driving data for car manufacturers, but the future of
the connected car will allow consumers to manage
their individual automotive policies from the
comfort of their driver seats. Automotive dealers
will be able to team up with insurance companies to
provide data on driving habits and behaviors such
as acceleration and taking corners too harshly via
embedded sensors, and assign highly personalized
But take this another step into the future and
picture your car connecting to your Facebook.
According to Ovum, insurers should focus on
creative initiatives that analyze data from a number
of sources, including social media and machine-to-machine communications.
If your car could sort through your contacts
and match your driving profile (developed by the
embedded sensors) to other people with similar
driving profiles then you could band together to
buy insurance as a group. For this example’s sake,
imagine that you’re the picture-perfect driver with
zero black marks on your record and your car has
grouped you with other spotless drivers.
Your group of safe drivers can now buy insurance
The Internet of Things may lead to more personalized insurance
coverage, benefiting both insurers and customers.
BY PAUL BERMINGHAM
RISK & INSURANCE®
• The Internet of Things could add $6.2 trillion in
global economic value annually by 2025.
• Insurers can collect data from connected cars,
wearable technology and smart homes.
• Streams of real time data could put an end to the
annual policy changes.
SMART BUILDINGS could monitor and update their risk portfolios in real time, sending updates to insurers for policy adjustments.
OCTOBER 15, 2014
The Internet of Things may
unleash as much as $6.2 trillion
in new global economic value
annually by 2025.