The IoT Creates New Insurance Product and Service Opportunities

A high-level perspective of the IoT

Digital Gaia emerges

Gaia, or the Gaia Hypothesis, proposed by chemist James Lovelock and co-developed by microbiologist Lynn Margulis in the 1970s, states “that organisms interact with their inorganic surroundings on Earth to form a self-regulating, complex system that contributes to maintaining the conditions for life on the planet.” 

The IoT is bringing society closer to Lovelock’s and Margulis’ vision. Why? Since humans first appeared on Earth, our species has continued to demonstrate two fundamental proficiencies: making tools and communicating. (See Figure 1.) 

Source: Market Insight Group, Ltd.

Recently, humans have begun fusing the two proficiencies together. That has resulted, in part, in the creation of the IoT. The existence of the IoT has the potential to transform Earth into a digital communications Gaia through interconnection of billions of artifacts, animals, and people on the Web through the use of IP-enabled, embedded, or attached sensors. Essentially, our species is overlaying the planet’s natural ecosystem with a global digital communication ecosystem of interconnected people, animals, and artifacts.

Making tools and communicating


As toolmakers, we humans have been and continue to be quite busy creating physical artifacts. For the purposes of this report, we consider physical artifacts to encompass every object on the planet, including:

  • clothes
  • residential, business, and government:
    • buildings, including walls, floors, ceilings, wall studs, sheetrock, and windows
    • lighting fixtures and furniture
    • transportation equipment for land, sea, and air
    • electrical appliances, electrical wiring, plumbing fixtures, and plumbing infrastructure
  • harnesses for animals
  • food containers, including pallets of food containers and shipping containers of pallets
  • plateware, silverware, serving equipment, cups, and mugs
  • healthcare facilities, medical equipment, medicine, and medicine containers
  • laboratory equipment
  • military equipment and munitions
  • roads, streets, highways, bridges, lane markings, lane barriers, and pipe bollards
  • safety equipment, including fire extinguishers and life vests
  • computers
  • computer hardware
  • telecommunication equipment, including sensors and satellites
  • mobile communication devices, including drones.

In summary, any physical object is a candidate for an IP-enabled sensor to be embedded in or attached to. 


Humans are a social species. We have changed our communication paths and capabilities across the eons of time. We began with gestures and grunts and moved to what nature provided (e.g. cave walls and animal skins), and then to our own creations (e.g. printing press, telegraph, radio, television, telephone, VoIP, smart devices). Market Insight Group believes that most man-made creations are actually a combination of humans’ two major proficiencies as toolmakers and communicators.

IPv6 to the rescue

All of the artifacts mentioned above represent a large and growing number of candidates to have IP-enabled sensors embedded in them or attached to them. There are also a large number of animals, including pets, farm animals, and other land- and sea-based animals (kept in zoos or that live in game preserves, aquariums, or in the wild) that could have IP-enabled sensors attached to them or ingest those sensors. In fact, several sources, including Cisco, claim there will be 40–50 billion objects with IP-enabled sensors embedded or attached by 2020. One source, IDC, estimates that there will be over 200 billion IoT objects by the end of 2020.

Are there a sufficient number of IP addresses to enable the billions of objects and people to be part of the IoT? Yes, if society, including enterprises, consumers, and government agencies, move from IPv4 to IPv6. 

We avoid getting into the technical differences between IPv4 and IPv6, or even the hurdles inhibiting a quick shift to IPv6. However, IPv6 has the capacity to provide an IP address for every atom on the surface of the Earth, with enough addresses left over to bring the atoms of another 100+ planet Earths into the IoT.

A plethora of IoT definitions and descriptions

But what is the IoT? What does the IoT encompass? There is no one consistent definition or description. There have been and continue to be many reports and articles written about the IoT. We list over 50 sources in the Sources section at the end of this report. 

We also list seven definitions and descriptions from the reports and articles we used for this report:

  • Boston Consulting Group: The computers and other inanimate objects that communicate with each other and with people through mobile technologies, sensors, and software.
  • Goldman Sachs Global Investment Research: The IoT connects devices onto the network, enabling information gathering and management of devices via software to increase efficiency, enable new services, or achieve other benefits.
  • McKinsey: Networking of physical objects through the use of embedded sensors, actuators, and other devices that can collect or transmit information about the objects.
  • McKinsey Global Institute: Sensors and actuators connected by networks to computing systems.
  • Michael Porter and James Heppelmann: Smart connected products that are complex systems that combine hardware, sensors, data storage, microprocessors, software, and connectivity in myriad ways. 
  • Rand Europe: The Internet of Things builds out from today’s Internet by creating a pervasive and self-organizing network of connected, identifiable, and addressable physical objects, enabling application development in and across key vertical sectors through the use of embedded chips, sensors, actuators, and low-cost miniaturization.
  • Verizon: The Internet of Things (IoT) refers to machine-to-machine (M2M) technology enabled by secure network connectivity and cloud infrastructure, to reliably transform data into useful information for people, businesses, and institutions.

A major principle and four consequences of the IoT for insurers

A major principle

Regardless of the definition or description, there is one major principle of an IoT-shaped marketplace that insurers must keep in mind as they prepare to compete in the digital communications Gaia. The IoT creates an IP-enabled environment that increasingly behaves like a natural ecosystem.

Four insurance consequences

Along with the major principle, there are four major consequences that insurers must factor into the go-to-market business model, strategy, tactics, and competencies (discussed later in the report). The consequences are that the IoT:

  • creates a new risk landscape through the alteration of existing risks and introduction of new risks
  • offers the potential for insurers to create value-add services, either based on insurance products (i.e. objects) or as services for insurance clients that are unrelated to insurance products
  • creates a market ecosystem of (re)insurers, ICT vendors, and system integrators, manufacturers of physical products, and service providers, each striving to find their own company’s best profit opportunities
  • elevates the importance of geospatial data elements (encompassing presence, location, and movement) for analysis and decision-making.

The extensive reach of the IoT across markets and government

There are no bounds to the application of IP-enabled sensors being embedded or attached to artifacts, whether natural or man-made, or people or animals. In the case of people and animals, the IP-enabled sensors can also be ingested. There are no limits to IoT use by government, enterprises, or consumers. (See Figure 2.)

Every potential artifact or person that an insurer might consider a risk to insure is or will be a receptacle for IP-enabled sensors in one form or another (embedded, attached, worn, or ingested). This situation remains true whether the artifact, animal, or person is stationary or in motion. 

More importantly for the (re)insurance industry, every IoT object represents an opportunity for (re)insurers to create new insurance coverage or new services that are not insurance coverage products.

Source: Market Insight Group, Ltd.

IoT spheres of activity

It can be overwhelming to think about how to compete in an IoT-shaped marketplace that could encompass billions of objects fitted with IP-enabled sensors. The McKinsey Global Institute provides a perspective of nine settings (e.g. human, home, and retail environments), while Accenture discusses the emergence of “living services”, keying off of the fact that products will become services.

Market Insight Group believes that insurers should also consider using an “IoT spheres of activity” framework. (See Figure 3.) The essence of this framework is to think of an IoT-shaped marketplace as a series of overlapping and interconnected spheres of activity. Each activity sphere is an ecosystem of functionality radiating outward, from the Core sphere to the Related sphere to the Adjacent spheres, and finally to the Infrastructure sphere.

Source: Market Insight Group, Ltd.

Descriptions of the activity spheres

At the Core is one object fitted with one or more IP-enabled sensors. The Core sphere includes basic functionality for that object, including the ability to store data, monitor data, send data to the other activity spheres, send data to other IP-enabled objects with embedded sensors, and send data to a customer’s smart devices or corporate data systems concerning:

  • its state of performance
  • its need to be repaired or replaced
  • its location when stationary and in motion
  • when other objects, animals, or people fitted with IP-enabled sensors are located within a specified proximity to it
  • the weather and other environmental conditions around it.

The Related activity sphere of functionality surrounds the Core sphere. Outward from that is an Adjacent sphere of functionality. Finally, an Infrastructure activity sphere surrounds the entire set of inner activity spheres. Insurers should consider the framework to be a set of placeholders for IP-enabled sensor-embedded objects and the concomitant functionality insurers want to associate with each of the activity spheres. Moreover, there could be, and probably are, instances when one or more different types of activity spheres are layered between the Core and Infrastructure spheres.

The above is an excerpt from a 2015 report I wrote of the same title as my blog. Let me know if you want to discuss insurance IoT issues with me.

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