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McKinsy report on IOT and insurance - 50b devices by 2025

The Internet of Things has entered customers’ everyday lives around the globe and transformed business models across industries. This environment brings opportunities for insurers: to develop new products, open new distribution channels, and extend their role to include prediction, prevention, and assistance.

The Internet of Things (IoT) will radically change the world in the coming years, and networked devices will be a substantial part of that change. In 2010, people owned 12.5 billion networked devices; it is estimated that by 2025 that number will have climbed to more than 50 billion (Exhibit 1). People use such devices, many of which are equipped with sensors and automatic-activation functions, in practically all areas of their life, including for both work and leisure. It has long been possible to install them quickly and easily and to wear them anywhere on the body. These devices can transfer huge volumes of data to their providers or third parties—whether for real-time analysis or to automatically trigger reactions or services—and are already altering traditional business and operating models in multiple sectors.

Exhibit 1

So far, insurers have mainly used IoT capabilities to aid interactions with customers and to accelerate and simplify underwriting and claims processing. Increasingly, however, new IoT-based service and business models are emerging that are highly attractive to insurers. In the context of these new business models, digital networking through the IoT could become a strategic component for insurers. For example, insurers could partner with companies to provide improved or new cross-industry products and services that harness IoT technologies and the new ecosystems, which are discussed further below (Exhibit 2).

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