Reducing and Shifting Risk with the Internet of Things

This comes off the back of a road safety survey conducted by AIG Singapore in 2015, which found that 68 percent of Singapore drivers would consider installing a telematics device to pay lower car insurance premiums, while more than half of drivers believe telematics would change their driving habits for the better.

The use of telematics to monitor data not only means that consumers can regulate their own behaviour for the better, but it also allows land transport authorities to track patterns including high-risk car accident hot spots to improve road design and incentivise safe driver behaviour.

Going a step further to automate our transportation process, governments and companies are pursuing solutions related to autonomous vehicles, or driverless cars.

A driverless vehicle takes people out of the equation removing human error, which is said to be the cause of 90 percent of road accidents while creating more efficient and environment-friendly travel.

Last year in Singapore, the first ever public trial of a robo-taxi service was launched by self-driving software company nuTonomy–one of four companies permitted by the local Land Transport Authority to conduct driverless vehicle trials.

It will be a while before driverless vehicles become the norm. In the interim, telematics and 360-degree sensors and cruise control are already available to detect unsafe driving behavior, and drivers can then take action to reduce human error.

Risk will Shift, not Disappear

If autonomous technology can effectively think and even act for us, who is to blame when something goes wrong? If personal responsibility is removed from the equation, where does liability lie?

For driverless vehicles, blame is likely shifted to manufacturers, software developers, and fleet operators in the event of a system malfunction, hack, or terrorist attack. So the risk will not disappear but simply shift in an age of IoT.

For insurers and companies, this means grappling with new risks such as privacy and cyber breaches, especially with the rising number of cyber attacks. Just this month, a global cyber attack unprecedented in scale hit more than 200,000 victims in 150 countries, including major companies and government bodies across Asia.

According to insurer Hiscox, cybercrime cost the global economy over $450 billion in 2016. This figure is only going to grow, creating a more urgent need for cyber insurance.

Based on what AIG Singapore has observed, less than 10 percent of Singapore companies currently hold such insurance leaving them vulnerable to cyber attacks and data privacy issues. As a result, we forecast that the number of companies taking up cyber insurance will accelerate to 40 percent by 2020.

Companies will need to tread the balance – work closely with their insurers to understand their most significant exposures in this new age, but also learn to leverage IoT to make meaning out of big data for their customers.

Seizing the Opportunities

As the IoT takes hold, it will lead to greater risk, but also a great opportunity. Health insurers providing free fitness trackers and lowering premiums to meet daily exercise goals will become the norm. Home insurance companies will incentivise customers to install connected devices to warn of potential dangers, while IoT-based analytics will be used to predict future events such as major weather patterns and natural disasters.

Companies, consumers, and insurers can work together to optimize the opportunities brought about by an IoT-enabled ecosystem, not only to mitigate risk but to prevent accidents from happening in the first place.