The potential for sensors, data and IOT (Internet of Things) to dramatically improve risk reduction has been known for many years. Telematics are now widely used for motor insurance, but some insurers still struggle to find ways to effectively partner with their clients to integrate the use of IOT into their overall offering.
Sean Ringsted is chief digital officer at global insurer Chubb. He's also the company's chief risk officer and was formerly chief actuary, sitting on the company's executive committee. He is one of the best-placed people in the industry to both know, and influence, the use of IOT, and he's a big supporter of the "prevent and predict" approach to insurance.
When we spoke to Sean for Episode 35 in July last year he spoke enthusiastically about the use of sensors and IOT, and referenced some of the companies Chubb was working with.
For this episode Matthew Grant and Sean talk specifically about examples of how Chubb is supporting its clients with IOT solutions that are providing benefits for their clients and for Chubb. They also discuss what can be done today, and what the opportunities are further into the future.
- Why IOT offers so much more than just risk pricing
- Recovery of multi-millions of dollars of stolen computers through the use of tracking sensors
- The prevention of major water damage to a college through early intervention
- Working with brokers to support the client
- Real-time exposure measurement
- Who should pay
- The opportunities and challenges of wearables
A summary and transcript of this discussion is available on request.
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Prevent & Predict - IOT Success Stories - Episode 83 highlights
Matthew: In what areas is Chubb seeing the most success from IoT opportunities?
Sean: It’s going to be a game-changer across the breadth of consumer and commercial. When we think about how the cost of the devices continues to drop and the connectivity continues to improve, those are only going to be accelerants to all of that.
It’s hard yards and there is no shortcut to rolling up our sleeves and figuring out how to get this into our clients, but there's no one single playbook to this. There needs to be a range of sensors and approaches that are customised for tackling specific risks.
Matthew: Are there practical examples that Chubb is working on?
Sean: We've already averted three large water losses at a major hospital through sensors being deployed there. They alert the facility management and our risk engineers fix the issues before there's any damage. It's saving that client millions of dollars. In relation to unoccupied building space, there's real value on the consumer side.
Some of our high net worth customers have installed sensors in their wine collections to monitor changes in temperature, humidity and vibration. Also, we recently had a truck of computers stolen, but because we had IoT sensors on that truck, we were able to recover it and $2 million in inventory. These sensors can not only monitor individual pallets but if a truck is parked overnight where it’s a bit more vulnerable, we can put the sensors around the vehicle.
Matthew: How does Chubb express the benefits of using sensors to clients?
Sean: The hospital is a good example of how these programmes are successful because they had a very proactive risk manager who saw the value more broadly than just lower insurance costs.
Yes, clients can drive lower costs, but they can also think about building maintenance, capital expenditure and their workforce differently. Rather than people patrolling to keep an eye out for leaks, and doing that in unsocial hours, it's far better to do it through digital means and direct human resource when the need arises for more valuated type tasks.
When the companies who own the assets are thinking about the risks in this way, we can partner with them, but insurance can’t drive that discussion alone.
Matthew: Does there need to be better awareness of the threat from escape of water?
Sean: There should be awareness in the industry about water damage from leaking pipes or faulty maintenance. Water is now a major peril and driver of insurance cost. An insurer can try and address it through rate, but they can help prevent the problem. If we can predict and prevent, as opposed to repair and replace, it’s a much better outcome.
If a customer has catastrophic water damage in their house, it's one thing to get the money from the insurer, but they also have to get a plumber in, get new carpets, new furniture and maybe there’s the prospect of mould. They have two or three months of inconvenience.
It’s much better to predict and prevent through technology and either detect the water before it becomes a problem or even prevent it by shutting down the water pressure before it leads to a loss.
Matthew: Does Chubb work with clients to get recommendations? Or are insurers giving the sensors directly to clients to put into homes or buildings to identify leaks?
Sean: It’s much easier to put these devices into new building structures. Sensors are part of the broader debate around making buildings energy efficient, or more resilient to climate change.
Commercial building spaces vary from old to new, so the type of solutions are going to be different. Both involve a discussion about the best way to address potential problems.
Matthew: Do brokers need to be educated about that or is there a team at Chubb that brokers can turn to?
Sean: It varies. What we're having to do is roll our sleeves up with clients on-site. Our risk engineering team needs to have that partnership. They have to walk the real estate, look at the structures, look at where the piping is, and figure out what's the most effective deployment of sensors. We need to be thoughtful about where we place them.
It's a more dynamic relationship that way between the insurer and the client. It’s very hard to do this trying to push this through a broker on a desktop. We have to be engaged on-site and have that dialogue.
Matthew: Are there themes coming through between unoccupied buildings that have sensors and are connected, versus those that aren’t?
Sean: It's too early to see any themes, but the case was very strong for IoT providing benefits in terms of unoccupied space. A couple of weeks ago, our sensors picked up a water leak on a college campus. That was in a third-floor laundry room in an unoccupied campus apartment. In that instance, a pipe coupling had broken off and was causing a flood and we picked that up.
It underscores that there’s a more efficient way to think about the risk management of a building through and remote monitoring.
Matthew: What about exposure management? Are there opportunities out there for real-time pricing or variable pricing using data coming in from sensors?
Sean: On the real-time side, we’re already there for risk management purposes. Alerts are going to risk managers and engineers when something's happening on the premises and they can determine what course of action to take, depending on the severity.
Real-time pricing is very much a goal in the future. Until this builds up in terms of the data, it will depend upon the type of exposure and peril where real-time pricing makes sense.
This builds up more of an exposure-based view of pricing as opposed to historical loss experience-based pricing. Based on the sensors, we get a much better handle on the footprint of the premises, of the building envelope, and can set pricing more thoughtfully than perhaps just looking at aggregated historical data would allow.
Matthew: That topic brings us on to wearables. What's state of the art with regards to wearables from a commercial insurance perspective?
Sean: The promise and concepts from wearables are there, but it's much harder than a building, which is easier to put devices into. With something like worker compensation, we've seen challenges with the cost of devices, the comfort level and what employees think about wearing the devices. The progress has been much slower.
Matthew: What about lessons from developing economies? We've seen solutions at very low cost in micro insurance using local sensors to record losses.
Sean: It's early days. The cost of the devices is coming down and they've skipped a generation of technology with 5G. There's massive connectivity, cost-effectiveness and robustness.
From crops, parcel tracking, healthcare, there's going to be applicability here. We're very excited about the potential, but it’s too early to see where and how that will translate into permanent services and insurance products.
Matthew: Using sensors means there is a lot of information being transmitted wirelessly. Does that require robust security?
Sean: This is the last mile in this topic of security, or privacy of interoperability between sensors and building management systems. All of these things have to be overcome. We spend a lot of time on security, deploying sensors that meet our security protocols and standards, but there's a lot of work involved. Thinking about data privacy, where data is stored and how that data is used. Even just getting devices to talk to each other and getting that data to flow.
There is a lot of work that still needs to be done to overcome those barriers. The more that can be done to improve data standards, and how data is used in the security of these devices will benefit the adoption.
Matthew: Where can people go to learn more about what is happening with IoT, either generally or related to insurance?
Sean: IoT is such a big topic. There are different slices to it in terms of whether it's consumer or commercial. Whether it’s the technology, or the security, or how it might be used, I found the most benefit by just going out and talking to people. Spend some time with the technology to understand the security, or underwriting teams to see where and how we can get this into the underwriting process.
I would encourage anyone with a curiosity in this to get out there and find out a little bit more. It's going to be tremendously exciting for the industry with real applicability. We need people who are curious to help make this happen.
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