Internet of things set to revolutionize insurance worldPosted On: Jul. 31, 2016 12:00 AM CST
NAPLES, Fla. — The internet of things promises to be the next industrial revolution, an issue for which risk managers and others must prepare, according to an insurance executive.
Brian Murdock, Atlanta-based managing director of Georgia, Alabama and Tennessee at American International Group Inc., termed the rapidly developing technology as “scary.”
David Haas, Miami-based managing director of Florida for AIG, described it as a “revolution.”
Mr. Haas noted that the internet of things is something “that for most of us here is completely new or something we know very little about.”
While the current environment of rapidly changing technology can make for uncertain times, it is important to consider “how you manage those scary and uncertain times,” Mr. Haas said. “What is the best way to extract the risk?”
He said the current environment of rapidly changing technology can make for some scary and uncertain times, but added that it is important to consider “how you manage those scary and uncertain times.”
In an AIG study titled “The Internet of Things: Evolution or Revolution?” that was made available at the presentation, Shawn DuBravac, chief economist at the Arlington, Virginia-based Consumer Electronics Association, said that the internet of things “will rival past technological marvels such as the printing press, the steam engine and electricity.”
Mr. Murdock said society has not experienced an industrial revolution since the personal computer came to the workplace in the 1980s.
“I really believe that we're at the beginning of not an evolution, but really a revolution,” Mr. Murdock said. “Our industry, specifically, is going to be right in the middle of this. It's an exciting time. It might be a little scary, but we're going to see, I believe, the world change in significant ways as a result of this technology.”
A simple definition of the internet of things, he said is “when you take one device — it could be a smartphone, PC, laptop — and that device is able to transmit information through the internet to another device and that occurs without any human intervention. That's the internet of things.
This kind of connectivity is spurring the growth of drones, telematics and autonomous vehicles while creating new opportunities and concerns for the insurance industry, the AIG executives said during last week's annual conference held in Naples, Florida, by the Florida chapter of the Risk & Insurance Management Society Inc.
A decade ago, about 500 million devices were connected to the internet, Mr. Murdock said. Today, 10 billion to 20 billion devices are connected, a number he said could grow to 40 billion to 50 billion in five years.
“Innovate or become extinct sounds rather severe,” Mr. Murdock said. “When was the last time you rented a video from Blockbuster? And how often are you now going out and developing your Kodak film? There's a couple of different companies that failed to innovate and were left behind.”
“We've got to take a look at what this technology is going to do to insurance,” Mr. Murdock said. “Rates are certainly going to drop with less people getting hurt, less property damage, but it's something to anticipate.”
Autonomous tractor-trailers might be safer than human-driven vehicles, Mr. Murdock said, citing rising global auto fatality statistics, but “how do you feel going down the road and looking at the 18-wheeler next to you and there's either no driver or the driver is clearly not paying any attention?”
“We can't talk about technology and any changes in how we do business without potential changes in liability,” he said.
While autonomous vehicles hold great promise for reducing traffic accidents, Mr. Murdock wondered if they would be programmed to protect the occupants above all else, or would they be programmed to minimize property damage.
“How is the liability going to change due to regulations (and) legislation?” he asked “You know the federal government is going to have some say in this ... Each state can have its own set of laws and probably will depending upon a variety of factors. There is going to be a shift from elation to fear over new technology, and how will regulators and legislators respond. That's something that companies have to take into consideration and be aware of.”
Mr. Murdock also discussed the dangers of hacking autonomous vehicles and played a video showing how so-called “white hat hackers” remotely took control of a Jeep Cherokee.
Last year, Sens. Edward J. Markey, D-Mass., and Richard Blumenthal, D-Conn., introduced legislation that would require officials from the National Highway Transportation Safety Administration and the Federal Trade Commission to develop standards for securing vehicles and protecting consumers' privacy. The measure was sent to committee.