The data from IoT provides scope for far more granular, and real-time, understanding of the customer’s risk profile. This can be used to modify behaviors to improve affordability, particularly for those in high-risk segments, said Anthony Delaney, SVP of Product at Acceptance Insurance. ‘If we can show customers in real-time the price movement when they make improvements, then we can build brand loyalty.’

It's vital, however, that there’s transparency around how pricing decisions are reached, and that this communication piece involves both consumers and regulators.

‘These are complex models, and communicating clearly how we reached a price and how that information can help people control their risk, will be key to alleviating concerns the regulators have that this is a black box,’ said Todd Lehmann, VP & Chief Actuary at Quincy Mutual.

These concerns are valid given that the risk landscape of these new technologies is still shifting. Collaboration with regulators now will be vital to ensure future regimes don’t stifle innovation or create costly lags in adoption.

‘We try to relate the models to something the regulators are already comfortable with so we have more flexibility,’ said Anthony Delaney of Acceptance Insurance. ‘When you are doing something new on pricing, it needs to be on things associated with cost, presentation, accessibility, ease of use and ease of access to purchase. Keep the core product similar to something that they are used to, innovate around the margins, and then push the innovation into the core model and repeat.’