Insurance Industry Trends: Connected Insurance and Risk Management

By: Ronny Reppe, 17. July 2021

We live in an increasingly connected world. For insurers, this Internet of Things-enabled era creates a wealth of new opportunities. This article gives you the whats and the hows of IoT and insurance risk management.

On a recent trip to London, I spoke to a fellow Norwegian working on a UN-supported project which marries 21st-century technology with the age-old art of farming. He takes advantage of all the sensor data he can get his hands on – everything from satellite data to weather data – to research how African crops develops year by year. With this data, he then applies machine learning technology to provide the UN with a five-year simulated prediction on how the agricultural sector will develop in the years to come.

This project is a shining example of how the technology broadly categorized as the Internet of Things (IoT) presents new opportunities for various sectors. In short, this technology is a network of physical devices able to collect and exchange data and communicate with each other, and this technology is transforming the insurance industry as we know it.


The number of IoT-devices worldwide is growing radically. Gartner predicts that 20.8 billion connected devices will be in use by 2020. For insurers, this growth in IoT devices and sensor data promises opportunities for both developing new products and value-added services as well as managing risks.

One well-known example is telematics-based car insurance. With telematics devices installed in cars insurance carriers can gather behavioural data on driving to offer customized insurance policies and better loyalty schemes to customers. And as smart home technology, connected cities and biometric wearables become ever more widespread, the possibilities will become even greater. Even the data the agricultural project mentioned above generates will undoubtedly become valuable for certain performers in the industry.

As will many other sources of data. And this is the true value of IoT – the data IoT-devices generates.


For insurers, the connected IoT-enabled era we’re entering promises opportunities for both developing new products and value-added services and managing risks based on streams of sensor data. “The Future of General Insurance Report 2016” notes that data from connected devices have the potential to finely calibrate pricing, improve claims handling, engage policyholders and cut fraud.

When it comes to risk management, we believe IoT will provide insurers with at least four significant opportunities:

  • Better pricing: Insurance companies have primarily relied on assumptions about certain demographics when establishing pricing models and strategies. IoT and sensor data will improve this inherently flawed method by giving insurers the opportunity to price premiums based on real data and actual behaviours accurately

  • Preventive measures: IoT and sensor data allows insurance customers to take the necessary steps to avoid risks. Insurers usually turn to historical data to make informed decisions about the future. With access to streams of real-time data, however, insurers can analyse new information and cross-reference it with historical data to make predictions and suggest preventative measures

  • Reduced customer churn: A natural and significant side-effect of utilising sensor data is improved customer experience and reduced customer churn. IoT and sensor data will enable insurers to become more than just claims payers, but even valued partners that can help customers manage their risks more efficiently. According to accountancy Ernst & Young, data streams from IoT devices will provide insurers with, amongst others, direct, unmediated customer relationships based on direct access to objective and unfiltered data

  • Effectivity and automation: IoT and sensor technology promises to increase effectivity throughout the insurance value chain through automation. For instance, the Norwegian marine insurer DNK offers automatic registration of insurance for ships traveling in and out of war zones. They have installed GPS technology in all their customers’ ships which automatically signals when they enter a high-risk zone and automatically establishes the necessary insurance and invoicing.


In an era where massive amounts of data streams to and from connected devices, legacy IT systems quickly become outdated and unfit for the task. According to “The Future of General Insurance Report 2016”, 66 percent of insurers will need to make significant to massive investments in data management and analytics to offer personalized value-added services based on IoT and sensor data.

To prepare for the IoT-enabled world and become a truly data-driven insurer, there are three areas I believe you should focus your efforts on:

  • Well-structured data and comprehensive data storage: In addition to massive amounts of data flowing in from external data sensors, insurers should not forget they have valuable internal data at their disposal just waiting to be leveraged. Historical data should be structured in a system that makes it easy to extract data on price and damage history and cross-reference it with data from other external sources

  • Big data analytics: Structuring your data in a coherent data storage will allow for advanced analytics. With streams of data flowing from connected devices, in addition to social media data, customer feedback data and weather data, the need for systems that allows for big data analytics increases

  • Data visualisation tools: As the amount of data generated increases radically, data visualisation becomes more and more critical. And if deployed correctly, data visualisation can be a source of deep insight into business operations – including risk management

Read also: Data Visualisation for Insurers: What it is and Why It Matters


IoT and sensor data will undoubtedly become an essential component in the future insurance industry operations. And the time to prepare, is now. In the home insurance market, for instance, one survey found that 78 percent of insurance customers are willing to share their personal information with insurance companies in return for various benefits, such as lower premiums or faster claims settlement. Progressive insurance industry performers should leverage this opportunity now.

The opportunities inherent in IoT and sensor technology for the insurance industry are manifold and a theme we will return to here on the Noria blog. You can expect to find articles covering how IoT may improve efficiency, optimize the claims process and increase product development flexibility and time-to-market.