Cities and communities around the world are slowly but steadily transforming into ‘smart’ connected hubs. Whether it’s switching to smart meters for their water or electrical utilities, or upgrading their communications and alert systems for emergency responders, public entities are starting to take action and engage with the absolute certainty that our everyday lives are only becoming more connected.
Smart cities can only be cultivated by communities with a master plan. That plan needs to determine top investment priorities, and it needs to be transparent and inclusive so that all stakeholders in the community (citizens, local business, government and private enterprise) can provide input, according to Thom Rickert, vice president and emerging risk specialist at Trident Special Risks.
Rickert’s basic definition of a smart city or community is an area that “deploys cyber physical systems to transform interaction between government, private enterprise and citizens.” There are multiple stakeholders with different expectations and different motives behind smart city investments. One certainty is that all stakeholders, including insurance firms, “should work together to enable better decisions and bring a higher level of service to a community,” Rickert added.
“As communities take their first steps towards this smart future, we’re seeing a few key trends. The first is that communities are looking to develop smart communications backbones. They’re looking to deploy 5G small cell towers in an effort to improve communications in all parts of their communities,” Rickert told Insurance Business. “While some communications upgrades will have to include pilot programs in limited areas, the community’s master plan must include the entire community.
“Smart mobility is another thing lots of communities are looking at as a first project. This could be anything from smart traffic control lights, to building gated areas for autonomous vehicles to operate in, or even the deployment of e-bikes and e-scooters. Introducing e-bikes can be considered a smart project because most cities are requiring the acquisition of the data the bikes are generating. That anonymized user data – including how long trips last, where and when riders travelled, how long bikes are parked in certain locations, and so on – can be turned into valuable insights and pushed back to the community in real time.”
Lots of communities are also looking at using technology to carry out public safety projects, like updating their 911 communication systems and enhancing emergency response optimization. Others are focusing their initial energies on developing smart utility programs and introducing smart water and energy meters.
“As communities progress along this path, the first thing they need to address is the enterprise risk management, using the same techniques they’re using now to determine their risk appetite,” Rickert told Insurance Business. “If you’re going to introduce sensors on garbage cans, how will that change your risk analysis? What happens if somebody hacks a garbage can? That’s not as important as if somebody hacks a sensor for releasing chlorin into the communal water system. Communities need to assess those exposures and then determine what risks they want to retain and what they want to transfer.
“The insurance companies need to look at their current coverage forms to determine whether they meet the needs of the policyholders with these new exposures. Over the last several years, many carriers have determined that their policies held silent cyber-type exposures where it’s not clear whether coverage is available under a property policy or a general liability policy. Almost every carrier I know, especially those active in the public entity insurance space, are examining their forms and seeing if they meet their own needs (in terms of maintaining financial responsibility for assuming only risk that is controlled, can be rated and charged for) and also providing coverage that will provide protection to their client.”