As the Internet of Things (IoT) becomes more widespread, it could lead to more innovation throughout the insurance value chain, according to research from Lloyd’s.
However, the insurance market also warned that IoT can potentially increase complexity and amplify risks.
The research, titled ‘Networked World: Risks and Opportunities in the Internet of Things’, was 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.
According to the report, IoT will lead to data capture and management at an unprecedented scale. This could mean better risk assessment and more flexible, bespoke, and real-time products. However, it may also increase policyholder concerns about the use and accuracy of their data.
The report said that new types of threats will emerge as IoT is adopted in more aspects of life, and this 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 will affect multiple sectors and lines of business, it added.
Another factor that will complicate insurers’ risk assessments are the incomplete security standards governing IoT. The report said that critical blind spots in the regulation can cause uncertainties surrounding attribution and liability in case something goes wrong.
“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 Dr Trevor Maynard, head of innovation at Lloyd’s. “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.”
“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,” said Dr Madeline Carr, director of the Digital Policy Lab at STEaPP. “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.”