The rise of the Internet of Things (IoT) is set to revolutionise the capabilities of re/insurers while simultaneously ushering in a new age of increased complexity and amplified risk, according to new research by Lloyd’s.
IoT will lead to data capture and management at an unprecedented scale, according to the report.
This could mean better risk assessment and more flexible, bespoke and real-time products. It may also increase policyholder concerns about the use and accuracy of their data.
Increased interconnectivity could see the creation of new business models where more is known about the insureds.
Bespoke policies could be generated in real-time and fraudulent claims recognised quicker. The ability to create personalised policies will also enable insurers to more accurately predict and mitigate risks.
However, the report also notes that new types of threats will emerge, which will increase the demand on insurers to come up with new products and services.
“Insurers should play a role in shaping the IoT landscape and Lloyd’s has proposed several options from leading on data standardisation to working with governments and tech companies,” said Trevor Maynard, Head of Innovation.
“Insurers should proactively talk with clients to review and assess 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 operate.”
The scale and variability of the type of disruption that could occur will affect multiple sectors and lines of business.
In addition, Lloyd’s says that the range and quality of security standards that currently exist for the IoT will make it hard for insurers to make risk assessments.
Madeline Carr, Director of STEaPP’s Digital Policy Lab, added, “Any large-scale technological shift raises challenges to the status quo and creates opportunities for those who see them early on in periods of transformations.
“Early adopters, especially in markets, are afforded additional benefits, as they can shape expectations, terms of engagement, and best practices in ways that address their interest.
“This report with Lloyd’s provides a timely study of not only the challenges but also multiple opportunities that the IoT will introduce into the sector,” she added.