The rise of the Internet of things could change every link in the insurance value chain, according to “The Internet of Things and the Insurance Value Chain,” from Celent, creating new business opportunities for early adopters and saddling late adopters with adverse selection.

Donald Light, director of Celent's Americas P&C insurance practice, explains that the Internet of things (IoT) consists of three interdependent components: things with networked sensors, such as automobiles, machines, buildings and people; data stores, whether they are local or in the cloud; and analytics engines. In an IoT infrastructure, the sensors embedded in the objects collect and transmit data regarding their internal states or environment to the stores, where they are analyzed or fed into models and then fed back to the objects or users (see diagram) offering unprecedented opportunities for insurers that embrace the technology.

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