What does IoT mean for the insurance industry?
Imagine waking up to a steaming cup of hot coffee by your bedside while your tablet reads out the latest news, your phone notifies you of potential traffic jams on your usual route to work and your fridge reminds you that you have run out of milk – all this while your favourite TV programme is automatically being recorded.
Is this a snapshot of the future? The Internet of Things (IoT) – connecting devices over the internet; letting them talk to us, to applications, and each other – may seem like an intimidating concept but it is not as futuristic as you may think. In fact, this year 6.4 billion IoT devices have gone online with another 20 billion expected to be connected by 2020. Here is what the IoT means for the insurance industry…
The concept of smart energy
Power outages are estimated to shave 2.1% off Africa’s GDP with a range of businesses suffering from lost production and damage to plants and equipment. Smart grids may be the answer, leaving businesses or organisations with a consistent and reliable energy supply, even when load shedding occurs. Here, electricity usage automatically switches between power sources (such as solar, diesel and battery power) as and when needed. This option will not only assist in mitigating risks but will also help reduce claims related to ongoing power outages.
Of course, given the continent and South Africa’s current energy challenges, renewable energy is in demand. This presents a significant opportunity for insurers to provide cover for these types of projects be it wind, solar or hydro. Top risks in this space include theft (especially of solar panels), faulty workmanship, system faults and fire. Machine-to-Machine (M2M) technology will assist in reducing these risks by allowing faults to be detected before significant damage can be done and allowing stolen components to be tracked and possibly recovered.
The concept of smart mobility
Telematic devices are currently having a significant impact on the insurance industry. Devices are able to ascertain how an accident was caused and who was at fault, by utilising dashboard cameras, which could support motorists during insurance claim disputes.
What about cars that switch off if they sense that a driver is drunk or cars that simply refuse to start if a driver does not make use of a hands free kit? Driverless cars may also become an everyday occurrence. This could certainly be a game changer for insurers – what would the risks be and how would we have to rewrite our policies?
Of course, technology disruptor Uber has already got the insurance sector thinking. Just in the first half of 2015, Uber recorded over two million booked trips in South Africa alone. Insurers will have to cater for additional and innovative motor products for Uber drivers, taking into consideration the owner driver model and the possibility of providing insurance incentives when the rules of the road are being obeyed – given that journeys are tracked.
The concept of smart cyber cover
As devices become more connected, additional vulnerabilities are exposed for both consumers and companies. The demand for cyber insurance protection has almost become a standard request for corporate organisations. Consumers are also placing more and more personal and business information online, increasing the need for personal cyber cover offering protection against hacks and phishing scams (where personal and financial information is accessed).
As smart cities, where everything is connected, become a reality, the opportunities for insurers and brokers also increase. Now is the time to advise on evolving risk and tailor products and offerings to meet new demands and changing needs. The key is to stay ahead of the curve and keep abreast of ongoing technological developments.
Sources:
The Guardian
Internet of Things Wiki
World Bank
