Wednesday, May 28, 2014

The Internet Of Things is Driven By Insurance

The basic business model of the Internet so far has centred around advertising.  You give up some of your privacy and your demographic information is sold to fund the service you use for free.  

The Internet of Things (IoT) is a new emerging part of the Internet that we’ve seen coming for a long time, but it’ now starting to really take off.  Have you wondered what it’s business model is?

Insurance.


  • The self driving car or car with an internet tracking system is less likely to have accidents or be driven erratically, so your car insurance company is happy to listen to data of what it’s doing.
  • The internet enabled fridge will make your health insurance company happy to hear that you keep running out of vegetables, and less happy about that full-fat mayo that you keep getting through.  
  • The same health insurance company will likely reward you soon for fuelband/fitbit data.  Participation in exercise and healthy lifestyles is tough to monitor but easy with a fitness band or similar equipment. 
  • The home alarm system, yep, that will tie your coming and going habits to the home insurance, too.


The next big battle is going to be over those who compete for discounts in insurance, and those who get penalized with higher premiums because they fail to conform to what the insurance companies want you to do.  Just think about that for a moment…  This isn’t about loss compensation, this is about loss control.  If you manipulate people into doing safer things, you control your potential losses.

Now, before you think it’s all doom and gloom here, there is a flip side to this coin:  
With automation and monitoring comes the elimination of some risks.  

The point of sensors in things is to detect the condition of things.  If you can now reliably eliminate bad things before they happen, there’s no point in insuring for the bad thing happening.  This means insurance companies are going to have to look for new risks to charge you for and profit from.

This is going to be very interesting to see how it plays out.  I have a feeling, though, that it’s not going to be a smooth ride.