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📡 '''Internet of things''' (IoT) describes the expanding network of physical devices embedded with sensors, software, and connectivity that collect and exchange data — a technological shift that is fundamentally altering how insurers assess, price, monitor, and mitigate [[Definition:Risk | risk]]. In the insurance industry, IoT encompasses a broad range of applications: [[Definition:Telematics | telematics]] devices in vehicles that track driving behavior for [[Definition:Motor insurance | auto]] [[Definition:Underwriting | underwriting]], smart home sensors that detect water leaks or smoke for [[Definition:Property insurance | homeowners]] coverage, wearable health monitors used in [[Definition:Life insurance | life]] and [[Definition:Health insurance | health]] insurance, and industrial IoT systems that feed real-time equipment performance data into [[Definition:Commercial insurance | commercial]] risk assessments. Collectively, these devices are shifting insurance from a model built on historical loss data and periodic renewal assessments toward one informed by continuous, real-time streams of information.

🔄 The operational mechanics of IoT in insurance typically follow a cycle: devices generate data, that data is transmitted to cloud platforms where it is aggregated and analyzed — often using [[Definition:Artificial intelligence | AI]] and [[Definition:Machine learning | machine learning]] — and the resulting insights inform [[Definition:Pricing | pricing]] decisions, [[Definition:Loss prevention | loss prevention]] interventions, and [[Definition:Claims management | claims]] processes. A [[Definition:Telematics | telematics]]-based motor policy, for example, may adjust premiums dynamically based on actual driving patterns rather than static demographic proxies, rewarding safer behavior with lower rates. In commercial property, IoT sensors monitoring temperature, humidity, and structural vibration can trigger alerts before a minor issue becomes a major [[Definition:Loss | loss]], enabling insurers and [[Definition:Policyholder | policyholders]] to shift from indemnification after the fact to proactive [[Definition:Risk mitigation | risk mitigation]]. Some [[Definition:Insurtech | insurtech]] firms have built entire product lines around IoT data — offering [[Definition:Usage-based insurance | usage-based]] or [[Definition:On-demand insurance | on-demand]] coverage models that would be impossible without connected devices providing granular, real-time exposure information.

💡 The proliferation of IoT creates enormous opportunities for insurers but also introduces complex challenges around [[Definition:Data privacy | data privacy]], [[Definition:Cyber risk | cybersecurity]], data ownership, and regulatory compliance. Regulators across jurisdictions — from the EU under the [[Definition:General Data Protection Regulation | GDPR]] to various Asian and North American frameworks — scrutinize how insurers collect, store, and use IoT-generated personal data, particularly when it feeds into automated [[Definition:Underwriting | underwriting]] or [[Definition:Risk classification | risk classification]] decisions. The sheer volume of data from connected devices also demands robust infrastructure and analytical capability, raising the competitive bar and often favoring larger carriers or technology-forward [[Definition:Managing general agent | MGAs]] with the resources to invest. Perhaps most profoundly, IoT challenges the traditional insurance paradigm by enabling risk to be measured so precisely that the pooling function of insurance could narrow — raising philosophical and [[Definition:Fairness | fairness]] questions about hyper-personalized pricing and the potential exclusion of higher-risk individuals from affordable coverage.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Telematics]]
* [[Definition:Usage-based insurance]]
* [[Definition:Big data]]
* [[Definition:Cyber risk]]
* [[Definition:Loss prevention]]
* [[Definition:Wearable technology]]
{{Div col end}}

Definition:Internet of things - Revision history

PlumBot: Bot: Creating definition