IoT and Insurance

Connected car, home and health technologies could substantially change insurers' value proposition. 60% of European top insurers have launched connected car solutions, but almost none has entered the connected home or health universe. This is one of the results of our study on the Internet of Things and its implications for insurance companies ("IoT Insurance").

The case for connected car insurance solutions is currently the most obvious one. The frontrunners are Italy and the UK, where telematics play the most prominent role in motor premiums. For customers there is a saving potential, while insurers can benefit from improved risk selection.

For connected health, the "quantified-self" tools drive the demand. Connected health insurance could add significant value to customer relationships. However, regulatory constraints on the use of data may be a tough barrier to overcome. Privacy is the main concern.

Preparing themselves for the next 2-3 years, insurers need to define and implement a specific IoT roadmap.


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Drones take Flight: Key Issues For Insurance Lloyd’s new report

20/08/2015 14:21

Lloyd’s new report - Drones Take Flight: Key issues for insurance - looks at the challenges around the development of insurance solutions for drones. Drones take flight: Key issues for insurance (291.91 KB, pdf)

The drones sector is expanding rapidly with global expenditure on the emerging technology set to double to $91 billion over the next decade. Drones are now used for a range of activities including military, agriculture, public services, wildlife protection and research.

However, this study highlights a number of concerns around safety, security and surveillance that could pose significant risks to drone operators and manufacturers, and could hamper the sector’s growth.

The report identifies three key areas that must be developed for the effective provision of insurance for drone operations:

  • Regulation, through the implementation of a robust, internationally-harmonious regulatory framework
  • Safety, through the continued development of training and licensing schemes, and further enhancements in ‘sense and avoid’ technology
  • Security, through the application of sufficient cyber security measures

Drone manufacturers must also be prepared to manage their increasing vulnerability to intellectual property and product liability risks.

The report concludes that drone manufacturers and users could face increasingly complex and high value risk exposures as the market continues to expand, and will need to work with regulators and insurers to ensure the technology is used safely and responsibly. By providing the support needed for the systems to operate safely and with due regard for third party interests, the insurance industry has the potential to act as an enabler for the successful adoption of this emerging technology.

Drones Take Flight is part of Lloyd’s Innovation Series of reports aimed at helping the insurance industry identify new and emerging risks, and the opportunities for new product development.


Drones: The Insurance Industry’s Next Game-Changer? 

Drones hold vast potential for streamlining and reducing the cost of insurance-related processes — from claims adjustment and risk-engineering, to post-catastrophe claims settlements for customers, to weeding out fraudulent agricultural claims


Commercial and personal-lines insurers that cover property risks are likely to be early adopters of drone technology. For example, a property adjuster or risk engineer could use a drone to capture details of a location or building, and obtain useful insights during claims processing or risk assessments. Drones could also be deployed to enable faster and more effective resolution of claims during catastrophes. 


While challenges on the regulatory front, privacy concerns and a lack of certain capabilities could stall widespread use of drones in the near future, once these obstacles are overcome, drones could have a significant impact on the P&C insurance industry. 


In this white paper, we will discuss the rapid growth of drone technology, what it will take for drones to have real business impact, and how several industries are already experimenting with drones. We will also cite four realistic scenarios for employing drones in the insurance industry.


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The Internet of Things: Evolution or Revolution? AIG Report

According to industry analysts, there are between 10 to 20 billion things connected to the Internet today. This ecosystem of connected objects forms the foundation of “Internet of Things” (IoT). Even though the technology that comprises IoT has been around for years, we’re only in its very earliest stages. The number of connected objects today pales in comparison to how many will be connected in just five years. Estimates vary, but the range of connected objects by 2020 will be 40 to 50 billion, and includes everything from cups and pens to homes, cars, and industrial equipment. 

IoT presents startling new opportunities for businesses, many of which remain obscure to the non-expert. The media chooses to focus its attention on the consumer side of IoT, such as the wearables market. There is little doubt that these products hold a prominent place in the IoT universe, but they remain a niche. Businesses that aren’t in the consumer market might mistakenly believe that IoT has nothing to offer. Yet the implications that IoT will have on all levels of business operations, no matter the industry, will range from the mundane to the profound. Problems that have dogged businesses for centuries will dramatically diminish and, in many cases, disappear all together. Matched with other technological developments such as cloud computing, smart grids, nanotechnology and robotics, the world of IoT that we are about to enter presents one giant stride toward an economy of greater efficiency, productivity, safety, and profits.  

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How the Internet of Things Is Shaping the Sensor Market

And vice versa. Particularly in the industrial space, increasing connectivity is driving sensor growth, but sensor innovation is also creating big strides for IoT applications. Through it all, M&A activity is running high.

The Industrial Internet of Things (IIoT) is nothing without sensors to measure pressures, positions, temperatures and other important production parameters. So it’s understandable that as IIoT and consumer IoT applications grow, the sensor market is taking off as well. And continued innovation in sensor technologies is only helping to fuel the expansion of IoT capabilities that much further.

The $85 billion sensor market has grown at a compound annual growth rate (CAGR) of more than 7.5 percent over the past three years, points out Denver-based investment banking firm Headwaters. That’s expected to grow to more than $115 billion by 2019, with 7.3 percent CAGR.

More sensors are showing up in the automotive industry (with connected and self-driving cars creating a huge demand) and healthcare applications (health monitoring and medical diagnostics being key), but nowhere is demand more significant than in the industrial space, accounting for more than a third of the sensor market.

IIoT is expected to stimulate huge demand for sensors, the Headwaters report says, pointing to industrial data that’s expected to double within the next 10 years. And given the domain expertise of industrial players, IIoT technology should see higher-margin growth opportunities.

As a more mature end market, industrial applications focus more on high-end rather than high-volume production, Headwaters notes, with demand for sensors that can be used in harsh environments with high reliability, precision and miniaturization. And as machine-to-machine (M2M) communications becomes more sophisticated, sensors are helping to enable predictive maintenance, asset monitoring and data analytics for production efficiency gains.

In process automation, systems for process control, process safety, operations management and asset optimization call for the increased use of sensors for measurement and analytical instrumentation, plus control for industrial settings, Headwaters reports. “The recurring theme of integrating multiple sensor technologies with software analytics will enhance the speed and precision of the information flow driving production performance, reliability and safety,” the report says. “The result is an improved cost structure and work environment leading to superior products or processes.”

Mergers and acquisitions

Part of the efforts to better exploit the opportunities in IIoT involve partnering with other tech players and acquiring companies with expertise in real-time data management, asset monitoring capabilities and sensor instrumentation/analytics.

Merger and acquisition (M&A) activity is ramping up in the sensor market, Headwaters executives note, as a way to overcome certain barriers to entry. Traditional sensor companies are snatching up players in new segments, while other technology manufacturers also look to get into the sensor game.

Headwaters analyzed about 100 M&A deals in the sensor sector since January 2013. More than two-thirds had transaction values of less than $200 million, showing the importance of the middle market to sensors. “Typical targets included specialized subsidiaries of large industrial companies and small private players,” the report says.

Sensor companies in the U.S., UK and Europe, at the forefront of innovation, remain good acquisition targets. More than 85 percent of all the M&A deals that Headwaters analyzed were in these geographical areas.

About a fifth of the sensor M&A deals since January 2013 have come from private equity (PE) firms, Headwaters says. “Underlying market characteristics (such as fragmentation and high barriers to entry), along with the considerable growth potential, are likely to see PE buyers continue to invest in sensor businesses, particularly those that offer valuable intellectual property, unique technical capabilities and strong customer bases,” the report explains.

Acquiring companies are also willing to pay more, Headwaters says. They’re paying often well in excess of 12 times the earnings before interest, tax, depreciation and amortization (EBITDA).

Headwaters analysts expect continued M&A strength in the sensor market, which will be key to an increasingly connected and automated world. “As the level of automation becomes more entrenched across key industries, increased sensor utilization will follow,” the report says. “This uptick in demand, along with significant solution-selling opportunities, is likely to continue to attract a number of new entrants into the market.”


Understanding the Internet of Things (IoT) (GSMA Report)

The Internet of Things (IoT) refers to the use of intelligently connected devices and systems to leverage data gathered by embedded sensors and actuators in machines and other physical objects. IoT is expected to spread rapidly over the coming years and this convergence will unleash a new dimension of services that improve the quality of life of consumers and productivity of enterprises, unlocking an opportunity that the GSMA refers to as the ‘Connected Life’. 

For consumers, the IoT has the potential to deliver solutions that dramatically improve energy efficiency, security, health, education and many other aspects of daily life. For enterprises, IoT can underpin solutions that improve decision-making and productivity in manufacturing, retail, agriculture and other sectors. 

Machine to Machine (M2M) solutions - a subset of the IoT – already use wireless networks to connect devices to each other and the Internet, with minimal direct human intervention, to deliver services that meet the needs of a wide range of industries. In 2013, M2M connections accounted for 2.8% of global mobile connections (195 million), indicating that the sector is still at a relatively early stage in its development. An evolution of M2M, the IoT represents the coordination of multiple vendors’ machines, devices and appliances connected to the Internet through multiple networks. 

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