Did You Know...? Part 5: Our RiskTech Future
Did you know...
... that by leveraging IoT, insurers and policyholders can create a virtuous cycle of risk reduction, cost savings, and improved trust in the insurance ecosystem?
In our previous articles, we focused attention on the Builder’s Risk insurance market, explaining that non-flood water damage claims in that coverage line cost the insurance industry $15 billion each year, representing over one-half of all insurance payouts. We also showed that many of these losses are either preventable or can be significantly mitigated using technology.
In the final article of the series, we’ll gaze into the future and share insights on the next generation of solutions to address water damage risk, including their integration into an overall risk management and insurance program.
Blending IoT and AI
The application of IoT technology to enhance risk management, reduce, minimize or eliminate losses, and improve insurance is an early step in what will ultimately become a far more robust integration of technology and risk management.
As attention becomes fixed on the potential for artificial intelligence (AI) in risk and insurance, the logical next step with respect to water damage protection is likely to involve a wider range of IoT devices to detect leaks, water accumulation, sudden temperature drops, and other environmental anomalies that could signal the elevation of risk. AI will also affect how alerts are handled; rather than alerting a construction team member to a pending loss event, an AI-driven mechanism might instantly trigger the shutoff of a valve or other automated remedial or corrective action.
Thus, instead of requiring dedicated staff to monitor a single construction site, the application of AI-driven technology would enable one individual to monitor multiple sites simultaneously. And as AI-driven solutions “get smarter” by gathering larger volumes of data over time, there will likely be more situations where the expanded use of IoT sensors will significantly reduce the need for a human interface.
Potential opportunities for robotics
On a broader basis, think tanks, innovators, and thought leaders in robotics may see the potential for creating systems where a full range of IoT sensors provide more comprehensive 24/7 monitoring of buildings during various phases of construction or even those fully completed and operational. These AI-driven mechanisms then receive signals from the sensors and activate appropriate responses that could vary by situation.
For instance, an AI-driven device might trigger an automatic valve shutoff, send an alert to a construction team member of an issue at the site, or trigger a response by a robot programmed to remediate the situation, such as water leaks, pooling, limited flooding, or sudden sharp drop in temperature.
Wider sensor deployment for smarter building protection
The current state of IoT involves the strategic installation of specific types of devices in loss-exposed areas, such as elevator wells, equipment rooms, and near risers. However, as IoT technology and other sensor devices evolve and different types of sensors become available, an entire construction project may be fully monitored by IoT sensors: the walls, the roof, underneath the roof, all the way down to the foundation.
At some point in the future, every part of a building may have some form of sensor embedded in it to monitor multiple potential hazards – water, fire, mold, theft, or other exposures – 24/7/365. As is the case today, however, service is critical to make sure the technology is properly designed, configured, correctly installed, integrated, and implemented.
We can also look to current military technology for a perspective on the direction of what may become tomorrow’s commercial applications. For instance, thermal technology might be applied to monitor vacant buildings, including those where catastrophes such as hurricanes or wildfires have forced the temporary closure of facilities, for intrusion by would-be arsonists or vandals. Similarly, the application of LiDAR technology, which uses laser light to create high-resolution models of ground elevation, may be expanded to identify potential vegetation hazards for wildfire risk or to define hurricane, tornado, and flood damage.
Technology, insurance, and risk management
As IoT and sensor technology continue to evolve and become more sophisticated, the implications for insurance and risk management are promising. Historically, property and casualty insurers seeking to drive improvements in their own financial performance have focused on reducing expenses, including gaining efficiencies driven by advances in core technology, faster and more accurate underwriting, and better claims management.
Beyond the current achievements with respect to water damage risk reduction, insurers now are able to improve the risk profile of their property portfolios through the systematic deployment of IoT. These implementations, combined with effective and proven response and mitigation capabilities, may create new opportunities for carriers to reduce claim frequency and severity and improve overall performance.
Many insurers already are applying sensor technology to innovative parametric solutions. For instance, a parametric program to address flood risk may have flood water level as a coverage trigger. Properly installed sensors can monitor water levels and verify when policy payments are warranted.
In workers’ compensation insurance, some insurers have cameras installed on site, which can detect hazardous conditions such as near misses and workers not wearing required safety equipment. They can also help make timely decisions on when a worker’s injury claim is valid and should be paid promptly or might need to be investigated.
The pace of change remains a function of available technology, strong value propositions, and innovation across the insurance ecosystem. In our experience, risk managers willingly accept change when new products and processes are proven to work, with a promise of reducing the Total Cost of Risk. Likewise, carriers embrace change and are willing to incentivize the adoption of new technologies, to achieve superior loss and combined ratios.
Which leads us to the shared purpose of commercial insurance, and how technology will play a role in defining the next generation of insurance and risk management leaders. The cost of claims remains the single largest expense in commercial insurance. If the objective is to leverage technology to minimize that expense, it serves all constituencies with a shared purpose.
Will insurers and policyholders create the virtuous cycle of risk reduction, cost savings, and improved trust in the insurance ecosystem that IoT enables? Only time will tell, but we are taking the steps needed to make sure the answer is “yes”.
"Did You Know ...?" is a series of articles created to help risk and construction executives identify, prevent and mitigate water damage and other perils affecting construction jobsites. This is the fifth and final article in the series. Previous articles were entitled: It’s a Problem, Solve Through Technology, Technology Works, and Keys to Success.
