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Internet of Things in insurance:
applications, benefits & real-life examples
June 10, 2025
The Internet of Things in insurance refers to a network of connected devices, software, and communication protocols enabling the collection, exchange, and analysis of behavioral and environmental data to help insurance providers evaluate risks and submitted claims and improve customer experiences.
With rich experience in IoT development, Itransition offers to implement IoT solutions for the insurance sector, enabling insurance carriers to streamline policyholder data collection and optimize core workflows with the help of connected devices and sensors.
IoT insurance market state
Scheme title: The forecasted IoT insurance market growth by region in the upcoming five years
Data source: mordorintelligence.com — IoT insurance market size & share analysis
48.3bn
the value of the global IoT insurance market in 2024
IMARC Group
29.2%
the projected CAGR of the global IoT insurance market from 2025-2033
IMARC Group
65.4%
the share of the automotive IoT insurance market, the biggest in the overall IoT insurance market
IMARC Group
Key applications of IoT in the insurance industry
IoT infrastructures serve to collect and transmit data in real-time, helping insurance specialists with various tasks.
Risk assessment
IoT devices gather a wider range of information than potential policyholders typically submit, allowing underwriters to create comprehensive risk profiles and accurately determine if they should offer coverage to applicants and on what terms.
Loss prevention
Encouraging policyholders to incorporate IoT-enabled alerting systems and smart gadgets to alert them in case of accidents and help prevent breakdowns or damage, insurance companies can lower their insurance payout amounts.
Claims processing
IoT technology helps claims adjusters investigate and resolve claims, automatically detecting insured events and sending details on them, including data about the factors influencing the compensation amount.
Fraud detection
IoT devices capture and send true real-time information on insured events and policyholders’ behavior, corroborating claims and helping companies lower the chances of fraud, accurately disburse funds, and reduce disputes.
Enhance your decision-making and operational efficiency
with insurance IoT
Sector-specific use cases of insurance IoT
Insurance IoT brings benefits to carriers across different sectors of insurance, from life insurance to property and auto insurance.
Auto insurance
Auto insurance providers can rely on telematics data to inform their decisions regarding both personal and commercial insurance.
- Automatically receiving data from connected vehicles on accidents for claims initiation
- Assessing risks based on captured vehicle information, such as vehicle mileage, health, fuel efficiency, and location
- Developing insurance policies based on a driver’s behavior data, including driving speed, steering wheel rotation, braking manner, and at what time of day the vehicle is mostly used
- Offering lower premiums for safer driving or well-maintained vehicles
Life & health insurance
Life and health insurers are increasingly launching initiatives that encourage customers to use fitness trackers and IoMT devices to track and share their personal data in exchange for more advantageous offers.
- Designing personalized insurance policies based on the customer’s activity data, including steps taken, distance traveled, and workout duration and frequency
- Evaluating risks with the help of vital signs tracking, such as heart rate, temperature, blood pressure, glucose levels, and sleep patterns
- Creating targeted incentives for people leading a healthy lifestyle or demonstrating active management of chronic diseases
Property insurance
Using IoT technology, home insurance carriers can not only personalize offers for homeowners and renters but also minimize compensations for losses from fires, water leaks, burglaries, and other events at customers’ properties thanks to IoT-enabled risk prevention.
- Determining risks, developing policy pricing strategies, and deciding on the payout amount based on the information gathered from smart home devices on home security and environmental conditions
- Notifying policyholders to ensure preventive maintenance of home fixtures, appliances, or amenities to minimize claims
Commercial insurance
Insurers can make use of data from enterprise IoT ecosystems to accurately assess risks, manage insurance claims, and determine fair payout amounts.
- Automating first notice of loss (FNOL) processes with IoT data capture across large-scale environments
- Assessing risks based on the working conditions within a company, including equipment state, air quality, and noise levels
- Determining claim compensation amounts based on the information on workers’ locations, environmental conditions, equipment safety, etc.
- Informing policyholders of dangerous locations for workers, fatigue levels, and heart rate, as well as the unusual behavior of industrial machines and robots
Agriculture insurance
Insurance companies use IoT sensors and connected devices in agriculture to monitor weather, evaluate crop hazards, and provide customized insurance coverage.
- Determining risks and establishing policy terms based on the information on equipment and machinery state, weather conditions, livestock health, and soil parameters
- Developing parametric insurance offerings for non-damage-related payouts based on the identified risks
- Streamlining FNOL submissions with the detection of drought, flood, or pest infestation
Examples of implementing IoT in insurance
The following insurance companies have successfully implemented innovative IoT-powered insurance service offers, which illustrate how IoT technology can facilitate risk mitigation, improve customer engagement, and encourage safer behavior.
State Farm Group
A US-based insurance company, State Farm, helps homeowners prevent electrical fires by offering them the opportunity to implement fire safety technology provided by a sensor technology vendor, Whisker Labs. State Farm supplies customers with free sensors that monitor homes for dangerous electrical arcing and detect hazards, helping reduce financial losses, injuries, and deaths. Today, almost 700,000 State Farm-insured homes across 45 states have installed these sensors.
Progressive
Progressive developed a Snapshot insurance program that allows drivers to save on premiums if they behave in a certain way, such as avoid sudden braking and abrupt accelerations, don’t drive late at night on weekends, or don’t use their phones while driving. Policyholders install a mobile app or plug a dedicated device into a car’s OBD-II port to start collecting data and receive discounts and personalized rates based on their driving behavior.
UnitedHealthcare
UnitedHealthcare created a Rewards program that encourages eligible customers to use wearables for monitoring their activity or completing daily goals, such as walking 5,000 steps a day, taking health surveys, and tracking sleep. The insureds, in turn, can earn money as a reward and transfer it to a prepaid debit card or a health savings account.
American Family Mutual Insurance
American Family Mutual Insurance rewards policyholders with homeowner insurance discounts for implementing smart home devices and sensors. Possible solutions include door, window, flood, and motion sensors, as well as smart smoke detectors wirelessly connected to a smartphone or tablet that detect the possibility of water leaks, fire, and intruders and alert residents.
The Internet of Things benefits for insurance
Data-driven decision-making
Using data gathered by the Internet of Things systems helps insurance companies better detect and evaluate risks, segment customers based on their risk profiles to create more personalized policies, and make informed claims decisions.
Higher operational efficiency
By automatically detecting accidents and sending related information to insurers, such as the vehicle speed at the moment of the collision, IoT systems enable adjusters to investigate claims and detect fraud more quickly without having to manually request more details from policyholders.
Cost savings
IoT devices encourage policyholders to lead safer lifestyles and proactively maintain equipment, cars, and property, preventing high-cost damage claims and payouts for insurance providers.
Expanded business opportunities
The implementation of IoT technology transforms existing business models from reactive to proactive and opens up new ways to serve customers, such as pay-per-use pricing models and parametric insurance.
Increased customer engagement & retention
By developing fair individualized policies tailored to policyholders’ behavior, with reduced insurance premiums for customers with safe driving records or dedicated packages for fleets entering high-risk zones, insurance agencies can boost customer satisfaction and improve relationships with policyholders.
Considering IoT implementation for your insurance company?
IoT insurance challenges
to overcome
With all the benefits IoT solutions promise to bring, there are several major hurdles insurance companies need to overcome to ensure successful IoT transformation.
Challenge | Solution | |
|---|---|---|
Resistance to change |
Encouraging policyholders to deploy and constantly utilize smart devices that transfer data to insurance
agencies can be challenging due to their reluctance to change. Another common fear is getting higher
premiums or lower claim payouts than those under traditional insurance models.
| Offer incentives, such as premium reduction, lower deductibles, and discounts, as well as separate rating models for customers choosing IoT-based insurance plans to appeal to budget-conscious consumers. Establish partnerships with related service providers, such as home security and equipment or vehicle maintenance businesses, to provide additional financial incentives and improved experiences to policyholders in managing their health or property. |
Data security & compliance |
The introduction of IoT technology traditionally creates cybersecurity concerns, introducing more
endpoints vulnerable to attack, and requires sensitive data transfer from end users to insurers.
| Invest in rigorous data privacy and security mechanisms, such as the encryption of data in transit and at rest, data masking, and data anonymization within your IoT infrastructure. Also, implement strict user authorization and authentication processes, such as multi-factor authentication, and regulate what employees can access what data to minimize exposure to PII. Moreover, urge customers to regularly update their devices with new security patches. Finally, continuously monitor changes in compliance laws, such as GDPR and CCPA, to maintain regulatory compliance and customer trust and avoid penalties. |
System integration complexity |
IoT software and devices provided by different vendors and using different communication standards, APIs,
or protocols can be difficult to integrate with insurance software, which hinders data transfer from
customers to insurance companies.
| Leverage cloud integration solutions like iPaaS to connect both cloud-based and on-prem systems more easily and accommodate growing data volumes or more integrations. As the number of integrations increases, consider implementing API management tools that allow you to centralize the deployment, control, and distribution of APIs while meeting high security and performance requirements. To ensure the interoperability of IoT systems and corporate software, choose tools that support industry communication standards, such as HTTP, MQTT, CoAP, and Zigbee, and data formats, like JSON, XML, CBOR, as well as HL7 and OBD-II standards for industry-specific cases. |
Emerging insurance IoT trends
Insurtech providers and insurance companies actively complement their IoT data management systems with other advanced technologies to derive more meaningful insights from the collected information and strengthen its security.
AI & ML
Artificial intelligence and machine learning algorithms automate the analysis of policyholder information, provide deeper insights, and enable predictive analytics. This helps insurance providers process large volumes of structured and unstructured data, identify hidden patterns, and discover and forecast upcoming events for advanced risk management and prevention.
Edge computing & 5G
By processing data closer to the source and using the low-latency 5G technology, IoT systems allow for faster and secure delivery of the growing amounts of data coming from IoT devices and applications. This, in turn, will enable insurance carriers to quickly extract insights from the data and respond to claims.
Blockchain
The distributed ledger technology and smart contracts enhance the transparency and security of data management and facilitate certain insurance operations, assisting providers with IoT data validation, tampering prevention, and payout automation for parametric insurance cases.
Our IoT services
At Itransition, we help insurance companies of various sizes implement robust, secure, and scalable IoT solutions.
Consulting
Our experts guide you through the IoT implementation cycle, recommending the best course of action and assisting in resolving any problems along the way.
- Business needs analysis
- Data volume and type assessment
- IoT solution functional and non-functional requirements elicitation
- Hardware requirements identification
- Assistance with choosing the right IoT platforms, hardware, and tech stack
- IoT architecture planning and connectivity mapping
- Outlining data security and compliance requirements
- Creating a strategy for user onboarding and adoption
We handle your entire IoT project, developing bespoke insurance IoT solutions or implementing out-of-the-box ones and training your team to properly use the IoT system.
- Business processes and needs investigation
- Solution conceptualization
- Choosing the best-suited tools and tech stack
- IoT solution prototyping and hardware planning
- Architecture design
- Handling back-end and front-end development/Сonfiguring and customizing platform-based IoT solutions
- Ensuring IoT system interoperability, security, and compliance
- Deploying the solution to the target environment
- Creating project documentation and user training
- Post-launch support and troubleshooting
Looking for a reliable insurance IoT implementation partner?
Embrace insurance IoT for more informed decision-making
Insurance IoT offers a lot of benefits to insurers, providing accurate data for making underwriting decisions and calculating compensation. With the ability to capture and analyze real-time data, insurance providers can develop more personalized policies, make their decisions more transparent to policyholders, improve customer trust and loyalty, and prevent fraud.
Yet, IoT adoption in the insurance industry remains a challenge that calls for a deep understanding of the industry specifics, as well as considerable IoT expertise. Whether you seek professional guidance or insurance IoT implementation services, contact us to start your digital transformation.
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