Cybersecurity: 5 Ways the Internet of Things Could Change Everything

The Internet of Things, or IoT, refers to the billions of physical devices around the world that are now connected to the internet, all collecting and sharing data. These connected devices have become ubiquitous, encompassing a range of products such as smartwatches, smart dishwashers, and smart cars, to mention a few. These connected devices are expected to become even more widespread in everyday life. 

The significant impact of this transformation extends to several industries, but this could be an especially large disruptor in the insurance industry. The IoT has the potential to revolutionize broker-client relationships, generate new insurance products and services, and give rise to various new exposures. here are five key things you should know about the IoT:

1. “Things” are Getting Smarter.
Over the last few years, advancements in technology have led to the integration of smaller, cost-effective microprocessors and Wi-Fi transmitters into various devices. Apart from "wearables" like fitness trackers and smartwatches, household appliances and vehicles now often collect data and communicate with users and other connected devices. According to a technology research firm, Report Linker, the IoT analytics market is estimated to reach a revised size of USD 81.8 billion by 2027, experiencing a compound annual growth rate (CAGR) of 26.7% during the period of 2020-2027

2. Telematics are Already Here
There are a number of possible areas for growth in insurance when it comes to the IoT, but one of the biggest is already here. Telematics—the tracking of vehicle data by smart devices—is already being employed by a number of personal auto insurance carriers. Telematics offers a few novel options, such as pay-as-you-go insurance, which calculates premiums based upon frequency of usage, and pay-how-you-drive, which collects data about driver behavior (such as speed, time of day, acceleration/deceleration, etc.) to adjust rates and offer discounts for good driving behaviors.

3. Products and Services from Carriers, Captives and Independent Brokers will Evolve.
We’ve often discussed the commodification of the insurance industry, as well as the transition to a service oriented mindset. The IoT has the ability to accelerate both of these processes. More data points will mean better actuarial data for carriers. Integrated data systems—such as a car/house fitness tracker system—will allow for highly personalized coverage options. It’s likely that, in the coming decades, carriers will consider offering coverages that blur the boundaries of more traditional insurance offerings.

4. New Regulation is Likely-Eventually
Insurance carriers want more data and individuals and companies want to protect their privacy. Life insurance carriers, for instance, could potentially use fitness tracker data to more accurately price out coverage. With enough data at their disposal, coupled with variable premiums and coverage options, losses could become virtually nonexistent for carriers. However, such coverage largely undermines the value of insurance to consumers, and privacy advocates might consider that level of carrier knowledge intrusive. That’s why it’s likely that, in the coming years, regulators will have to decide just how much insurers are allowed to know about insureds before assigning coverage. In order for risk pools to remain viable and mutually beneficial to both carriers and clients, some limits will have to be placed upon policies.

5. New Cyber Exposures Will Emerge
It probably goes without saying, but each new device connected to the IoT represents another potential point of access for criminals. In addition to the sheer number of connections available to hackers, the interconnectedness of IoT devices poses a new kind of threat. Accessing a single device could, in theory, give a criminal access to a person’s home, car, phone, work and many other smart systems.

Looking to the Future
The IoT has already begun to reshape the lives of millions of Americans and experts predict even more rapid growth in the coming decade. The growth has been so fast, in fact, that it is hard to know exactly what will happen next.

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