Student whitepaper - Insuring the Internet of Things

Posted by Jenni Armstrong on 25 April 2016

The final module of Squared Online sees Squares work in groups to create a whitepaper that sells their ideas on how a major digital trend will affect an industry. From the whitepapers submitted, three are identified as the most viable, persuasive and creative.

In the first of three-part series this week, here's one of those top-performing whitepapers from Group 2 of the October 2015 cohort. It offers a great perspective on the state of the insurance industry and possible future direction through forging strategic partnerships, investing in a new R&D approach and adopting more aggressive merger and acquisition strategies.



  • The insurance industry must change its business model in response to the Internet of Things (IoT) in order to survive and see off challenges from outside the industry
  • Insurers need to develop partnerships with hardware and software manufacturers, to acquire the expertise needed to develop new products for the connected consumer
  • Insurers should adopt aggressive merger and acquisition strategies, and act as incubators and seed funders for startups working in insurance
  • Insurers must take a leading role in regulating the IoT by investing in public affairs and establishing a regulatory body



The connected car has become a catalyst for disruption within the automobile insurance industry. Insurers now have access to new data sources (telematics) enabling better customer intelligence for segmentation and risk understanding. As a result, insurers like Aviva are offering discounts to customers based on their driving style and habits and tech players such as Google and Apple are entering the market.

The IoT delivers a new dynamic by providing real time access to this data for manufacturers and insurers. According to the FinTech Collective, an estimated 380 million autonomous vehicles will be on the roads by 2030, reducing the number of accidents by 30%. Less accidents mean lower insurance premiums. As a result, the auto insurance market could shrink by 40% in the next 15 years (1).


The connected home provides insurers the opportunity to offer more than just cover. As consumers connect their entire houses as one ‘smart’ ecosystem, they are generating useful data which many are prepared to share with insurers (63% of 25-35 year-olds state they are willing to share their data with insurers (2)).

As well as assistance in case of an emergency, telematics data can be used for risk assessment, pricing and personalising services. BNP Paribas Cardif already offers Habit@t, an insurance product that uses technology to secure customers’ homes. Habit@t employs sensors to monitor the home and in the case of danger - fire, smoke, flooding, lack of electricity - it alerts the customer and the operations center (3).


Digital technology is disrupting the healthcare sector and offering significant opportunities for insurance. Wearable technology is now established and younger customers (25-34) are increasingly willing to share their data (40%) with health care providers (4). This is re-shaping the sector, motivating providers to focus on encouraging customers to lead healthier lives, rather than just treating them when they are ill.

Companies like Oscar Health are leading the charge, using technology to simplify the entire health insurance experience. Through their app they enable customers to talk to a doctor online and get
prescriptions without leaving home. This recent start-up is now generating over $200 million a year in revenue and growing fast (5).


By 2025, the IoT will be pervasive, with connected 'things' driving a data explosion with sensors embedded in cars, buildings, and wearable devices - so much so that a family of four could have more than 100 connected devices (6). Whilst this represents a rapidly changing environment, the biggest threat will come from an industry acting on future challenges with strategies that are linked to the past.

With increasing demands from ‘always-connected’ consumers, the insurance industry will need to embrace more sophisticated digital platforms; develop new products and manage employees alongside artificial intelligence. 73% of insurers agree that providing personalised customer experiences is a top-three priority (7). If incumbent insurers do not adapt to this changing landscape, consumers will look for more new players in the market offering real time products and a higher level of personalisation.

Additional challenges to incumbents will come from the rapidly developing tech sector - Google already has obtained licenses to sell insurance in 48 US states, and in the UK it provides auto and travel insurance quotes. Walmart and IKEA have taken on insurance distribution, as have a number of mobile phone companies. Accenture’s Digital Innovation Survey found that close to two-thirds of insurers believe external players such as online service providers and aggregators will enter insurance distribution leveraging their digital capabilities (8).

The IoT provides an opportunity for insurers to reinvent themselves and monetise digital disruption. With the opportunity to unlock market growth through new value propositions and change to the core business model, the nature of risk will change, creating new opportunities for insurers prepared to embrace disruption.


As this paper states, the insurance industry must adapt or die to survive and we recommend a fundamental re-think of the current business model as outlined below. For existing providers that embrace and lead change, there is opportunity and reward. Those that stand still will fall prey to the growing number of tech-focussed market entrants.


Insurance providers must partner with hardware and software manufacturers to develop products that respond to the growing trend in personalisation. For example, wearable technology that provides data for health insurance or a smartphone app that can shut off the water supply when a pipe has burst.


  • Bridging existing skills and expertise gap, to better understand the practical applications of IoT
    and influence on underwriting risk
  • Fast track development of new products (first to market); expanding product offering to include policies and connected devices required by consumers 
  • Personalisation of products; remaining relevant to millennial generation and younger
  • Respond to changing consumer behavior, winning back trust of the consumer


  • Regulatory and safety issues surrounding products developed
  • Reliance on external suppliers for insight and application of knowledge


  • Change in mindset required for working in partnership
  • Identifying market leaders in hardware and software manufacturing to reduce risk of partnerships


Partnership alone will not be enough to protect the sector; forward-thinking companies will also fund and support a range of tech startups in order to develop new products. A new approach to research and development will be required and the sector must ensure that leaders have the right skill set and experience to make this transition.


  • Predicting and managing risk in the future; developing consumer products alongside regulatory changes
  • Diversification of product and access to intellectual property


  • Seed funding is high risk; even with experienced mentors and support many startups will fail. Forbes estimate start-up failure rates to be between 80-90% (9)
  • Distraction from what may be seen as ‘core business’; dramatic shifts in culture can be difficult to manage


  • New skill sets required for identifying and managing startups
  • Securing buy-in at the Board and shareholder level


In addition to partnership and supporting innovation, we suggest that insurers adopt aggressive merger and acquisition strategies in order to bring on-board startups that will provide the necessary expertise and insight.


  • Fast-track means of product development and bringing on board the right talent and expertise to adapt product offering in-line with the IoT and changes in consumer needs


  • Financial investment required; investments is always inherently high risk


  • Integrating company cultures are a challenge, even for businesses familiar with M&A
  • Securing buy-in at the Board and shareholder level


The new model of insurance that we describe will require a legal framework to underpin it and insurers should seize the opportunity to help shape it. This will not be achieved by insurers acting alone and we recommend that the sector works together alongside government to draft the necessary legislation. Significant investment in public affairs activity will be required, but it will pay dividends in terms of protecting future revenue.


  • Help to shape the sector and be at the forefront of regulatory decisions surrounding insuring IoT


  • Investment (financial and time) into organising and contributing to a public affairs/ industry
    regulatory body


  • Working in partnership with competitor companies
  • Long term strategy which will require ongoing focus


IoT.jpgThe Internet of Things provides an opportunity for insurers to drive market differentiation, and strengthen customer relationships for better financial and reputation returns. Though inherent risks exist with change, insurers should look to mediate the changes and mitigate the risks for consumers in a bid to build more
calculated insurance products.

Few industries are better placed to take on the responsibility of governing the dangers of disruptive new technologies than the insurance sector. Those lenders who take the risk to and lead from the front stand to gain significant advantages over those who continue with the status quo.

  1. FinTech Collective A.I, Auto Insurance. Published online 27th Feb 2016
  2. Insurance Disrupted, Deloitte. Published Online 20th July 2015
  3. European Premiere of Habit@t the First House Insurance Policy, BNP Paribas Cardif. Published Online 28th October 2013
  4. Insurance Disrupted, Deloitte. Published Online 20th July 2015
  5. Oscar Health Gets $400m and a $2.7b valuation from Fidenlity, Fintech Collective, Published Online 24th Feb 2016
  6. The Internet of Things, A.T. Kearney. Published Online 2nd January 2014
  7. Digital Insurance Era: Stretch Your Boundaries, Accenture. Published Online 8th April 2015
  8. Beyond Insurance: Embracing Innovation to Monetize Disruption, Accenture Strategy. Published Online 24th April 2015 
  9. The Major Reasons Startups Fail and How You Can Avoid Them, Forbes. Published Online 5th March 2015

Find out more about Squared Online: you can give us a ring on +44 (0) 20 7173 5938, or download the brochure to read about the course and the Squared experience.

Topics: Digital trends, Expert comment, Digital marketing, Whitepaper, Squared Network