As per a new research from Lloyd’s, Networked World: Risks and Opportunities in the Internet of Things, published in collaboration with University College London’s (UCL) Department of Science, Technology, Engineering and Public Policy (STEaPP) and the PETRAS Internet of Things Research Hub, analyzed the impact of the IoT on the insurance sector.
IoT, which will lead to data capture and management at an unprecedented scale, according to the report, could mean better risk assessment and more flexible, bespoke and real-time products. It may also increase policyholder concerns about the accuracy and use of their data.
Meanwhile, interconnectivity will create new business models where policies are generated in real-time and are bespoke, more is known about insureds, and fraudulent claims are recognized quicker. The ability to create personalized policies will also enable insurers to more accurately predict and mitigate risks.
However, the report also mentioned that new types of threats will arise, which will increase the demand on insurers to come up with new products and services. The scale and variability of the type of disruption that could occur from these new types of threats will affect multiple sectors and lines of business.
In addition, the range and quality of security standards that currently exist for the IoT will make it difficult for insurers to make risk assessments. And there are critical blind spots in the legislation and regulation of IoT devices and their impacts, which include uncertainties surrounding attribution and liability, should anything go wrong.
To help insurers to understand the evolution of the adoption of the IoT and its potential impacts, the report includes 10 extreme scenarios on 4 critical sectors: Agriculture, Infrastructure and Water, Marine and the Smart Home. Each scenario highlights how IoT technologies could generate and exacerbate risks that could cause losses in several sectors and lines of business at the same time.
According to Dr. Trevor Maynard, Head of Innovation for Lloyd’s, insurers should play a role in shaping the IoT landscape and Lloyd’s has proposed several options from leading on data standardization to working with governments and tech companies. Insurers should proactively talk with clients to review and evaluate all risks associated with IoT to provide them with advice on best practice and appropriate risk solutions, thereby shaping the development of the IoT ecosystem in which they function.