It has begun – IoT is helping price insurance premiums More than six million devices are already connected to the internet, and thousands of devices are getting connected every day. IoT's real-time data collection and sharing power has created significant and new opportunities to deliver finer products, specialized pools of risk and predictive modelling and improved loss control. The Internet of Things has showcased a great potential to reshape the way insurers assess, price, and limit risks.

Take an example of an insurance firm Zurich that has offered a discount on monthly insurance fees, if a customer uses the IoT alarm offered by a company called Cocoon. These security alarms have embedded sensors and infrasound technology. It can sense subtle, inaudible vibrations in the air caused by movement.

This example shows us that if IoT-based data is gathered and analysed carefully, it will help insurers in helping policyholders to prevent losses. Thus, insurers can avoid claims in the first place and get the reward of increased profitability. Also, they can reduce premiums and aim to improve customer retention rates. Following are the examples of how insurance companies can use IoT to price insurance premiums by reducing the potential hazardous occasions:

• Commercial infrastructure can have embedded sensors. These sensors can monitor safety breaches such as smoke or toxic fumes. For the insured, it allows for adjustments to the environment to mitigate a potentially hazardous event. For the insurer, it helps them understand how safe the work environment tends to be.
• Wearable sensors can monitor employee movements in high-risk areas and transmit data to employers. For insured organizations, employers can warn the wearer of potential danger as well as decrease fraud related to workplace accidents. For the insurer, these devices provide critical risk data to adjust insurance premiums.
• Smart home sensors can detect moisture in a wall from pipe leakage and can alert the owner about this issue prior to the pipe bursting. This can avoid a large claim to the insurer, and also save the owner from inconvenience and damages.
• Sensors can also be used in socks and shoes made especially for people suffering from diabetes. These socks and shoes alert the user about the potential foot ulcers, excessive pressure, and how well blood is pumping through capillaries. This helps in avoiding costly medical claims as well as potential life-altering amputations.

Beyond minimizing losses, IoT applications can also help insurers to improve customer experience, and promote customer retention. It can also satisfy the ever increasing market demand for lower pricing. Many times, insurers struggle to cultivate strong client relationships, both personal and commercial, given the infrequency of interactions throughout the insurance life cycle from policy sale to renewal. Many of these interactions entail unpleasant circumstances: deductible payments or, worse, claims.

Thus, using IoT, insurance companies can re-skill and scale up the capacity of business functions. In order for insurance carriers to harness the power of the IoT, they must find out creative ways to gather data and make use of it. Also, for gaining competitive advantage they have to make significant investments in technology and must re-tool their business processes.