IoB Insiders Concirrus CEO Andrew Yeoman says insurers must be prepared to change through the Internet of Things (IoT).
The Internet of Things (IoT) will become as pervasive as the internet itself. Here at Concirrus, we’re focused on the insurance market and we’ve previously made the bold statement that “in the future, there will be two types of insurer: those that have fully integrated the IoT into their business processes and those that used to exist”.
We believe this choice is binary for one simple reason: the IoT turns unknowns into knowns. Whether it’s about understanding the status of an asset, a piece of equipment in your home or observing the ‘behavior’ of someone or something, the rapid rise of the IoT and connected technologies will transform business processes and business models around us.
Butfors! An interesting term…“butfor X you wouldn’t have Y”. Butfor the internet you wouldn’t have home shopping, Black Friday, Amazon, dating sites, insurance aggregators (including those opera singers and Meerkats – you see, not all bad news) and these are all business models that are powered by technology. If the technology fails, the business model cannot be operated. “Simples!” IoT powered businesses are beginning to emerge with Hive, Nest, Neos, Ingenie, BMW cars, etc. They are springing up everywhere.
Related: Speciality insurer HSB turns to IoT to improve risk management
Insurers must form closer relationships with customers
But achieving these new, connected, business models will not be a one-step journey. The ability to develop connected policies and products, forming a closer and more valuable relationship with customers, is something that requires trust and a new technical approach. Only by combining multiple sources of contextual information (including verified asset data) can insurers really hope to create a connected ecosystem with the customer at its heart.
By using this data, and the insight that it can provide, the potential to change the way companies think and act is huge. Picture this scenario: as an insurer, you may be aware that 2,000 tonnes of insured cargo is on board one of the vessels that you underwrite and is about to enter the Suez Canal. But did you know that the vessel had recently broken its policy conditions by entering a restricted zone? Oh, and by the way, it also failed to completely avoid Hurricane Matthew as it crossed the Atlantic – also a policy contravention. The engine diagnostics are also showing a minor fault that will likely require layover in a port within the next 48 hours. Contextual information offers us a clearer picture.
Having relied on reported behavior for centuries, insurers can now start to observe behavior in near real-time. Suddenly, risk starts to be looked at in new ways, and the role that insurers play in their customers’ lives becomes new and interesting – one of value and assurance rather than merely underwriting risk. If your home water-leak detector registers a leak whilst you’re on holiday, your insurer could (with your permission) take action to prevent the damage.
But bringing all this data together and translating it into natural human language is one thing. Verifying the authenticity of that data is another thing, and one that is becoming an increasingly hot topic of conversation within insurance. How do you know that the asset you’re getting information from – a car, a water-leak detector, a fitness wearable – is the genuine article belonging to your customer? Security and trust at the device-level is becoming critical for IoT as a whole, not to mention insurance.
This issue was brought to light in October as internet service provider Dyn was subjected to a cyber-attack when thousands of devices were hijacked and used to flood the system with communications. Jeff Jarmoc, head of security at Salesforce, tweeted, “In a relatively short time we’ve taken a system built to resist destruction by nuclear weapons and made it vulnerable to toasters”. As Jason Lynch, head of IoT strategy at Analog Devices, puts it, “security cannot be an afterthought and as we move from simple IoT solutions to deploying more complex IoT solutions the stakes will increase significantly”. Each successful attack is a setback for the Internet of Things.
But new technologies are being adopted. As Lynch says, “at the basis of all security solutions is identity” and what’s called “root of trust”. Techniques within hardware root of trust can now enable single devices to generate individual identity codes or keys that allow them to be positively identified. Success in this area could help provide the comfort and trust that is needed to help accelerate the development and adoption of connected technologies by various industries, not just insurance.
Authenticity, therefore, is one of the many challenges that is being addressed at the moment within insurance. With greater trust will come greater freedom and appetite to move more quickly towards a truly connected future. One in which a closer relationship exists between insurer and insured and where data provides meaningful value for both parties.
Related: Harnessing the digital insurer revolution through IoT