THE INSURANCE IMPLICATIONS OF THE INTERNET OF THINGS
RC: In your opinion, what kinds of opportunities and challenges are likely to surface as a result of the continued expansion of the Internet of Things (IOT)?
Coyne: The concept that almost all electronic devices will be connected to the internet brings tremendous opportunities and benefits for the insurance industry. Motor insurers have for some time used the ‘black boxes’ to monitor younger drivers and tune the premiums accordingly. The monitoring of the condition and location of a wide variety of equipment could deliver better risk management and should lead to the ability to reduce plant, machinery and goods losses. Like many bleeding edge technologies, security considerations are unfortunately an afterthought and hackers relish the opportunity to gain access whether to gather personal or commercially sensitive information, or simply to create damage or publicity. There are already many reported incidents of internet connected cars being hijacked and controlled by hackers and in coming months it is almost inevitable that some of the widely available heating and cooling controls, wearable device or food processors will succumb to the hackers’ efforts.
Halliday: It seems clear that for insured risks where ‘usage based insurance’ is already on offer there is a huge opportunity to expand and evolve insurance offerings so that they become the norm – for example, vehicle telematics. This is particularly because e-call legislation is driving the inclusion of vehicle telematics as standard in the EU. Consumer wariness, however, remains relatively high, so insurers are likely to be challenged to be more transparent about how their offerings work, in particular the treatment of data which could be related to data subjects, and to sell the upside associated with it such as reliably lower premiums based on properly analysed data, and the benefits to the insured of loss control technologies which sit alongside them. Outside P&C there are other areas which will be closely connected to IOT development, such as insurance against fraudulent activity and cyber risk insurance, which undoubtedly represent opportunities for enterprising insurers.
Oct-Dec 2015 Issue
IT Group UK Ltd
Baker & McKenzie LLP
4 Pump Court