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Risk Management Feature - Embracing IoT, sector by sector

Source: Middle East Insurance Review | Nov 2015

In the previous instalment in this series, we looked at how the Internet of Things (IoT) is presenting new opportunities for businesses. The following extract of an AIG white paper looks at how IoT is impacting different industries.
In five years, there will be no industry that IoT won’t impact directly. The pace of adoption, matched with consumer expectations and demands, will quickly turn any non-IoT industry into a museum relic. That said, many industries have time to understand IoT and where it might improve their long-term strategic goals. 
   Because IoT has uses that span the business spectrum, we’ve divided how each industry is using IoT into four categories: safety, efficiency, data-driven decision making, and infrastructure.
• Safety: In 2010, the World Health Organization reported that 1.24 million people worldwide died as a result of motor vehicle accidents. Every year, approximately 30,000 people are killed in motor vehicle accidents in Europe. It’s roughly the same in the US.
   IoT technology, particularly the rise of safety-focused sensors on automobiles, promises to drastically reduce the global death rate from motor-vehicle accidents. Because a vast majority of such accidents are the result of human error, replacing the human decision-making component in driving is the object of autonomous vehicles.
   Driverless cars, such as those companies like Google and Tesla are developing, are slowly coming on line. Many of these come in the form of safety sensors that give a motorist a 360-degree view of their car, while others work autonomously, protecting the car without direct driver action. Auto companies also use the data these sensors acquire to help them produce safer, more efficient cars. While these data-collecting devices raise certain privacy concerns, they’re the next step in the automobile evolution.
• Efficiency: The financial sector has helped pioneer the use of mobile technology to make banking easier for the average consumer. One obvious example where IoT and the banking industry intersect is with ATMs, which can be equipped with sensing technology.
   A user with the right biometric identifiers might one day withdraw money from a sensorised ATM without ever taking out his debit card. Looking ahead, IoT promises to connect a consumer’s financial activities with other aspects of his or her life. One example is connecting a user’s health monitor with his financial portfolio. As Deloitte has noted, a health crisis, captured by the monitor, could signal the user’s bank to automatically rebalance his portfolio to minimise his financial exposure.
• Safety: For decades, maritime shipping companies have equipped their fleets with a variety of sensors to monitor critical vessel systems, weather and sea conditions, and cargo. IoT technology now allows these sensors to acquire data that can then be analysed to improve voyage optimisation, safety, and stowage processes. For example, open source software uses a ship’s sensors to provide real-time vessel movement information to other ships and land-based sea traffic coordination centres. 
• Data-driven decision making: At International CES 2015, Ericsson unveiled an enhanced IoT solution for maritime shipping. The cloud-based platform will connect ships at sea with “shore-based operations, maintenance service providers, customer support centres, fleet/ transportation partners, port operations and authorities”.
   The solution will allow both sea- and land-based operators to monitor fuel consumption, engine performance, weather, traffic and navigation for improved voyage optimisation, track-specific cargo location and condition, and through improved communications, entertainment options and telemedicine, even enhance the wellbeing of the ship’s crew.
Property (real estate)
• Efficiency: At the property level, “smart” objects like thermostats and other appliances already help homeowners improve energy efficiency and lower utility costs. We can expect these products to proliferate as the home becomes more and more “connected”. 
   But the real value of IoT in homes will come when these connected appliances and other household objects communicate with each other. So, for example, a home’s smart thermostat will know the outside temperature and relay this data to the home’s closet system, which will suggest appropriate outfits for the day. Another example is when a home’s system, let’s pick the closet again, syncs with a user’s calendar. The closet then “knows” if the user has a meeting that day and selects the appropriate clothing.
• Data-driven decision making: An IoT-equipped home can all but take the place of a human agent. It can list itself on the right real-estate listings and schedule showings because it will “know” when the owners will be out of the house.
   Some brokerage firms are already experimenting with Apple’s iBeacon technology and “for sale” signs. The concept is that a prospective homebuyer who passes a house for sale will receive a message on their smartphone from the iBeacon giving instant details on the house. Inside the house, iBeacon technology can be used to provide prospective buyers with floor plans, previous owner video testimonials, and even renovation opportunities – likely in partnership with a home-improvement and hardware store.
• Infrastructure: IoT technology, particularly sensors embedded in specific risk areas, can help diminish, and in some cases eliminate, hazards such as floods, fires and structural delay. For example, electrical systems can be equipped with sensors that monitor the flow of electricity through a building. When a wire or a connection has failed, or is about to fail, raising the probability of fire, the sensors can immediately warn technicians. 
   Real estate companies can use IoT sensors in their properties to monitor a variety of risk-related incidents, including the presence of dangerous gas, termite infestations, HVAC/ boiler malfunction, and general wear and tear. Even when a particular structure seems to be in top condition, analysts can pore over the massive amount of data captured by these embedded sensors to identify clues to future problems.
• Efficiency: The energy industry already reaps huge rewards from IoT technology. At the consumer level, users are able to use advanced appliances and “smart” devices to cut energy usage and costs. Businesses as well can utilise these technologies, but at a much more advanced level. An office building with multiple tenants, for example, can capture and monitor energy usages from each floor. Analysing the data, the building can identify areas of wasteful energy use and cut costs.
   The energy industry has long been at the forefront of IoT technology, primarily with utility companies innovating ways to read energy usage of commercial, industrial, and residential customers remotely. According to Ericsson, the number of connected devices being managed by utility companies globally is expected to grow from 485 million in 2013 to 1.53 billion in 2020. In fact, the utility industry is the second-largest source of “machine-to-machine” service provider revenue, behind the automotive and transport industries. 
• Safety: “Fly-by-wire” systems have been a staple of the aerospace industry for decades. Put simply, “fly-by-wire” allows a pilot to focus his attention on monitoring the plane while sensors and automated systems take care of the rest. Indeed,“fly-by-wire” is becoming so advanced that in many ways, airplanes are virtually autonomous vehicles. 
• Efficiency: On the ground, aerospace companies are employing IoT technology to improve the maintenance and safety measures. For example, General Electric’s aircraft engine maintenance business uses onboard sensors in jet engines to capture real-time data on engine performance. The volume of data this process produces allows GE to boost engine efficiency, cut fuel costs, and shorten travel times.
Health care
• Data-driven decision making: There is no realm of health care that does not or will not employ IoT technology. At the patient level, IoT-enabled wearables allow doctors to capture health data that would be otherwise unknown. Yearly physicals could become obsolete because doctors already have copious amounts of individual patient data that let them know if an in-person check-up is warranted.
   Likewise, patients with troubling health signs that might not show symptoms will be detected by the physician before they lead to more severe problems. Clinicians can use this data to not only better understand the health of the individual patient, but also create detailed data sets of patient subgroups, with the objective of treating and preventing humanity’s most ancient diseases.
   Meanwhile, hospitals can use IoT technology to find actionable intelligence in the data they collect. For example, many hospitals intentionally overstock inventories to prevent shortages on critical supplies. IoT-enabled scanners give hospital administrators visibility into their stock and know the moment that shortages occur.
   Also, IoT devices can drastically improve the treatment in hospitals, particularly in emergency situations. A paramedic can use IoT devices to take a patient’s vital signs and other statistics, which are then instantly relayed to the emergency room. Once the patient arrives, no longer will doctors waste valuable time in understanding a patient’s condition because they will already know.
• Safety: IoT can help keep employees safe, especially those working alone in hazardous areas such as construction sites. For example, wearable technology can be equipped with embedded sensors to determine when a worker might be dangerously exerting himself or performing an unsafe maneuver. The sensors can also monitor hazardous environmental conditions, such as extreme temperatures and the presence of toxic substances. Also, behavioural data collected from these wearable sensors can help safety managers understand when a worker is likely to have an accident. This predictive element in IoT – while in many ways still theoretical – is one of its most exciting (as well as potentially exploitative) features.
• Data-driven decision making: Companies can also utilise IoT products to ensure the integrity, quality, safety, and security of components in their supply chains. Gartner estimates that “a 30-fold increase in Internet-connected physical devices by 2020 will significantly alter supply chain leader information access and cyber-risk exposure”. IoT devices embedded throughout the supply chain will give managers a deeper insight into their processes, from in-transit visibility to depot security.
Important to understand the risks
Many industries have time to understand IoT and where it might improve their long-term strategic goals. Our hope is that readers will be able to start implementing a strategy for their own business based on the examples provided above.
   However, businesses cannot afford to invest in their IoT systems without first understanding the major risks inherent in any system that is connected to the Internet. In the next article in December, we will take a look at the risks associated with IoT. 
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