How will the Internet of Things affect your world?

Estimates suggest over 500 billion devices will be connected to the Internet by 2030, which means the Internet of Things (IOT) is set to revolutionise every sphere of life, including the insurance and financial advisory sectors.

There'll certainly be inherent risks to our 'connected' future, with greater opportunities for hackers to use these numerous 'entry' points to disrupt networks, or to sniff out information from our digital footprint to commit fraud or theft.

However, our growing digital footprints also offer numerous opportunities, particularly in the world of insurance, as they help to predict behaviour and are rich sources of information to help rate risk.

Unobtrusive, in-depth market research

With the opportunity to track every aspect of life, from daily food intake, sleep patterns and activity levels, to the routes travelled most, average distances travelled per month, average speed, where petrol tanks are filled most often and which card is preferred when paying, data analysts have at their fingertips an opportunity for unobtrusive in-depth market research. While this needs to be solicited on the part of the data provider (and technology user), the application of big data and advanced analytics tools has the power to revolutionise both short- and long-term insurance, with further applications in financial planning.

In this regard, by using data and analytics, financial services will be able to better individualise investments, establish financial plans and offer insurance against hard data and facts, rather than the biased, incorrect or, often, patently false self-reported information supplied by clients.

Human bias

This is because human bias and expression, often doesn't correlate to actual behaviour. However, with the assistance of hard data from telematics or the use of smart devices to gather information, these biases can be reduced or eliminated and there'll be less chance to hide specific facts.

This not only helps advisors to better understand their clients and select the best products for them, but more accurate data and insights can also assist in improving underwriting to secure the best possible premium. These processes may also reduce the potential for material non-disclosure, which could affect a claim, for example.

Furthermore, with the continued collection of data, which establishes trends and patterns, there may be opportunities to regularly improve premiums through continuous underwriting based on monitored behaviour. This could lead to new products such as dynamic life insurance, which scales in accordance with real-time changes to a client's risk profile. While this has been possible in the past, it was prohibitive due to the administrative requirements. However, IOT and its integration with other systems has the power to change that.

There's no emotion with technology

The truth is, technology is much better at performing certain tasks, especially where emotions can influence decisions. However, an element of interpersonal engagement will, for the foreseeable future, still be required in the sector. It will therefore be advisors who best understand these new technologies, embrace the way they're changing the industry, and accordingly adapt their business model, who will survive and thrive in the information age.