We are hearing a lot about the Internet of Things and the big impact it will make, but what does it all mean for the digital life insurer?

It seems one can hardly open a magazine or website without some reference to the Internet of Things—the growing network of smart devices that will increase the flood of big data into something of truly Biblical proportions if we are to believe all the predictions. The connected home and car are getting most of the attention, but also the various devices for monitoring health vital signs and exercise are also very much in play.

From an insurance point of view, the obvious impacts are on the short-term side of things. In this series of blogs, I want to give some thought to the implications for those of us who take the longer view, the life insurance sector.

Read the report.

Let’s begin at the beginning and consider what the Internet of Things looks like from a life insurer’s point of view. Basically, we can conceptualize it as being made up of three components:

• A network of devices with sensors.
• Central repositories of all this data, which would include “unstructured” data such as video, images and text.
• Analytic engines of great power to process all this information, and help turn it into insights.

The value of the Internet of Things, as Celent researcher Donald Light reports, lies in connecting the three to create feedback/ learning loops both for the devices or machines and the humans using them. [1]

The other trend that runs alongside the growth in the Internet of Things, and is related to it, is a fundamental change in the way consumers generally behave, and what their expectations are. In particular, the astonishing growth in the use of smartphones and tablets means that the Internet of Things has a mirror image in the Internet of people. Wedded to their smart devices like they never were to the PC, humans are now more attuned to the notion of machine-to-human interaction, and they are much, much more demanding. (For more on these issues, please look at Accenture 2013 Consumer-Driven Innovation Survey: Playing to win and Are insurers rising to the challenge of mobility?)

All of these trends are in turn driving a redefinition of the traditional insurance value chain. More about that next week.

[1]Donald Light, The Internet of things and life/ health insurance”, Celent, May 2014.