Across global insurance markets, rising climate volatility and operational pressures are exposing the limits of reactive models. Insurers are being pushed to move beyond simply paying out after disasters to actively helping customers prevent losses.
Take the June 2025 floods in South Africa’s Eastern Cape, which resulted in more than R5 billion in damage and nearly 5,000 people displaced. Events like this highlight the immense strain on insurers with costs rising sharply while communities endure devastating delays in recovery. This is exactly where preventative insurance can change the equation, reducing losses before they spiral into billion-rand claims.
Rather than waiting for disasters to occur, insurers are beginning to harness automation and IoT to spot risks early, intervene faster, and limit claims before they escalate. In this blog, we explore how these technologies are reshaping risk management and why the time to act is now.
Preventive insurance is an approach that uses real-time data, automation, and connected devices to detect, mitigate, or even eliminate risks before a claim is filed. The earlier a risk is identified, the more time there is to take preventative action. This could mean automatically shutting off a water valve when a leak is detected in a home, flagging unsafe driving in motor insurance, or scheduling maintenance before operational failures in industrial equipment.
Insurers are embracing this model for several reasons: it reduces loss ratios, enhances customer experience, and supports more accurate, real-time underwriting. But most importantly, it aligns with the growing demand for smarter, digitally-enabled insurance solutions.
The Internet of Things (IoT) is at the core of preventative insurance. By embedding sensors in homes, vehicles, and commercial infrastructure, insurers gain continuous visibility into customer risk profiles and the ability to respond in real-time.
● Smart electrical fault sensors that detect wiring issues before they spark fires.
● Smoke and heat sensors that trigger early fire alerts.
● GPS trackers for fleet risk monitoring and theft prevention.
● Wearable devices that monitor vital signs in health policies.
While IoT gathers the data, insurance automation turns it into actionable insights. Modern insurance systems can process incoming signals in real time and trigger workflows without human intervention.
● Risk-based alerts that notify policyholders of dangerous trends
● Automated service dispatch e.g., a plumber sent when a leak is detected
● AI-driven behavioural analysis to identify policyholders with rising risk levels
● Dynamic pricing adjustments based on real-time inputs
Automation also supports underwriters and claims managers by flagging outliers, reducing manual tasks, and enabling faster decision-making. Importantly, it ensures insurers can scale preventative models without a proportional increase in operational overheads.
Shifting from reactive to proactive models isn’t just about technology; it delivers measurable business outcomes, including:
● Fewer and smaller claims: Intervening early reduces both frequency and severity of claims.
● Lower operational costs: Automated processes streamline claims handling and customer engagement.
● Improved underwriting accuracy: Real-time data allows for more granular risk assessment and pricing.
● Higher customer satisfaction: Policyholders value insurers who help them prevent losses, not just cover them.
To deploy preventative models effectively, insurers need more than just devices; they need the right digital infrastructure.
● IoT integration capabilities to capture and process live risk data
● Scalable cloud platforms to manage large volumes of data
● Automation engines to trigger workflows and deliver timely interventions
● API-ready systems that integrate seamlessly with external service providers
A modern insurance management system (IMS) like Cardinal’s brings all these components together seamlessly. From data ingestion to automated dispatch, insurers can manage the full prevention lifecycle within a unified, secure platform.
Of course, transformation doesn’t come without challenges.
● Data privacy: Collecting and acting on live data requires strict compliance with South Africa’s POPIA regulations.
● Customer acceptance: Not all policyholders are immediately comfortable with monitoring. Education and opt-in transparency are key.
● Upfront investment: While modular solutions exist, deploying IoT and automation still requires an initial capital outlay and internal alignment.
These hurdles aren’t deal-breakers. Over time, the gains in efficiency, reduced claims, and better customer retention far outweigh the effort.
Preventive insurance is no longer just a future concept. It’s already reshaping the global market, and South Africa is poised to follow suit. Insurers that embrace IoT and automation today will be tomorrow’s market leaders, with leaner operations, lower claims ratios, and stronger customer relationships.
The technology exists. The use cases are proven. What remains is a strategic commitment to doing things differently and a platform capable of making it happen.
IoT helps detect insurance risks early by capturing real-time data on factors like temperature, humidity, motion, or driver behaviour. This data is analysed to spot abnormal patterns such as a leak or unsafe driving, allowing for immediate intervention before damage or injury occurs.
By reducing the likelihood and severity of claims, preventative models can lead to lower premiums or risk-based discounts for policyholders who adopt connected devices or participate in proactive programmes.
Modular, cloud-based solutions allow small insurers to integrate IoT and automation gradually, starting with specific lines like property or motor, without overhauling legacy systems.
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