Insurance: With ‘connected policies’, who owns IoT data?

IoB Insiders Andy Yeoman, CEO at Concirrus, discusses why the current insurance business model is under threat, why ‘connected policies’ are the future, and why data ownership matters.

As IoT projects move closer to fruition in a range of industries, including insurance, it is worth considering what will change as a result of connected technologies. Some changes will result in positive new business models and closer relationships with customers. Others will be more unpredictable and some may even be dangerous. In short, beware the law of unintended consequence – if it can happen, it probably will.

For an example, look no further than another, rather older technology: safety helmets. In 1990, the Australian state of Victoria made safety helmets mandatory for all bicycle riders. While there was a reduction in the number of head injuries, there was also an unintended reduction in the number of cyclists and a corresponding decrease in exercise. In terms of net health, this was counterproductive – and certainly not what the regulators had intended.

Moving forward to the present day, smart toasters, connected rectal thermometers and fitness collars for dogs are just some of the everyday items being connected to the web as part of the IoT.

Connected machines and objects in factories offer the potential for a ‘fourth industrial revolution’, and experts predict more than half of new businesses will run on the IoT by 2020. It is what we do with the information produced by networks of these connected devices that allows us to revolutionise business models. But what else will change as a result of this?

Connected insurance policies

For insurers, the availability of all this information means that ‘connected policies’ are the future and the current business model is under threat. In fact, with connected insurance receiving 80% of all insurtech funding, it’s clear that this is the next big wave for this industry.

However, what do you do when a solution becomes the problem? Enter the law of the unintended consequence…

In 2012, a teenage driver and his friend were killed as he raced home to beat an insurance company-imposed curfew monitored by on-board computer. A black box had been installed in his car as part of a discounted policy that enables young drivers to receive more affordable car insurance. As part of this, a driving curfew was agreed between the hours of 11pm and 5am, with a £100 penalty for breaking this. The coroner ruled that the curfew was a “very significant factor in his driving”, and hence his death.

Data ownership

As IoT becomes more mainstream in the insurance sector, one of the biggest battles we shall face is around data ownership: Who’s data is it? Who is responsible and who is held accountable?

Let’s say there’s a leak in your loft and your ceiling falls in. Then, when you call the insurance company, they say, “Ah yes, we saw that there was a build-up of moisture with our connected leak detector device.” Your first question will be, “If you saw that happening, then why didn’t you do something about it?”

For years, insurers have been there to pick up the pieces in the event of a catastrophe, but now customers need them to intervene and act. Where is that line drawn and how do we opt in or out?

If you can see a leak – yes, call the plumber. If you can see my office being broken in to – yes, call security. But if you see me speeding – Ssshh, don’t tell anyone.

But think about it: in the event of an accident, if data shows that someone was persistently speeding on the street on which the incident occurred, yet the insurance company had failed to act, then where do we all stand?

Ultimately we’re not there yet, and insurers’ duty to customers (not to mention the definition of ‘gross negligence’ in a world of data) will need to evolve in line with technological advances. Nevertheless, interesting times are ahead. Buckle up and hold on tight. We see disruption around the corner!