Across commercial real-estate/ property and the insurance industry, the early vanguard are already reaping the benefits of real-time data insights from the use of IoT devices. These organisations are moving from reactive to predict and prevent and in the process making their people, processes and assets more resilient and safer.
From deploying sensors, to tracking the top causes of loss (for example, fire and escape of water), and ensuring the optimal use of resources available, there’s a great deal that the world of IoT and real-time data insights can offer.
That all being said, adoption is still the major challenge to leveraging the benefits of IoT technology and real-time data.
SENSE Consortium invited a panel consisting of Executive Chairman of GSS Analytix Juan Bernal, Founder and COO of Previsico Dr Avi Baruch, CEO of Intelligent AI Anthony Peake, and CEO of GWTInsight Iain Wilcox, to discuss how IoT devices and real-time data can be exploited and how to maximise return on investment (ROI) across the whole value chain from insurance client to broker to insurance carrier.
The commercial property market has been loss making for numerous years and yet it is a long-term goal of the market to improve loss ratios, ameliorate the total cost of risk, drive growth and cultivate strong, positive relationships between insurers and clients.
The discussion was focused around how IoT devices can help accelerate these long-term goals and shift from a reactive industry paying claims to a predict and prevent industry with risk management at its core.
A more holistic picture
Because of the vast data collection capabilities of IoT, risks can be thought of, monitored, and managed from new creative angles. Today, 5-10% of commercial properties use risk engineers for surveys with subsequent risk mitigation recommendations. However, on average only 1 in 7 of the identified risks are accurately monitored/ resolved.
This current level of monitoring is inadequate to protect from risk or to make accurate pricing and underwriting decisions. Here, IoT ‘wins’ because sensors permit a 360° view of risk and across an entire portfolio of cases continuously – not just on a Tuesday in February, the day of the risk survey.
In a recent SENSE Consortium survey, 88% of insurers agree that real-time data collection is a useful tool in risk mitigation, yet less than 40% of insurers know the process. IoT provides new perspectives of risk and is a proven technology – it appears indeed to be an adoption problem to move from a manual industry to a real-time automated one.
By using IoT technology, insurers can consider risks from multiple, more subtle angles and be more effective (with a greater ROI) when the potential of data collection technology is considered more holistically.
Dr Avi Baruch discussed the complexity of flood monitoring and how IoT is enhancing risk management ROIs. By installing devices to measure water levels which send warnings when levels increase, this enables proactive loss prevention measures but… vegetation build-up can obstruct water flows thereby increasing the risk of a flood. IoT sensors exist that can measure both the water and vegetation levels, providing preventive action across the complex and interactive web of environmental factors. This in turn reduces the impact of loss before it occurs by taking
preventative action ahead the flood itself. It is not only at the underwriting stage where IoT can deliver new benefits, it is also when there is a claim. Anthony Peake gave the following example: a farm in Italy had claimed a loss on their roof after a storm which supposedly caused the roof to cave in. By employing a wide range of IoT sensors in combination with satellite imagery, Intelligent AI were able to determine that the claim was fraudulent. The data revealed that the storm did not occur on the day of the claim and the roof had been broken prior to the storm. In this example, the use of IoT data analytics facilitated a more effective claims investigation allowing insurers to identify fraud.
The third lens is that of in-person visits from the risk engineering team. Considering the ROI for having virtual risk engineering and 24/7 for a profession that has a talent shortage enables more focused in-person surveys where they’re needed and where the data points to those riskiest buildings in the portfolio. The rest can be monitored remotely for 100% of the portfolio that is technology enabled for building performance and risk monitoring. “Business decisions, including risk investment, should be based on accurate data that is framed with a bigger picture context.” Executive Chairman of GSS Analytix Juan Bernal said.
ROI is a binary measure
IoT devices can be used more effectively when the ROI is defined with each risk specifically considered independently. How do you quantify the cost saving of something that never happened because it has been prevented (or loss impact reduced through active mitigation)? Every scenario will generate its own ROI concerns that need to be considered individually.
Operational Efficiency: “no one joined this market to move data between spreadsheets” CEO of Intelligent AI Anthony Peake. A significant proportion of time is wasted by underwriters and risk engineers in the re-keying of data between incompatible systems – and that data is ‘static’ (typically COPE factors). Juan Bernal identified 3 specific areas of ROI that are enhanced by IoT: operational efficiency, specific benefits driving a competitive edge and data retention.
IoT devices and real-time data feeds can update systems automatically and across a portfolio of risks, streamlining the work process and driving superior insights on the buildings. Ultimately, this yields more office time to be dedicated to client-insurer interaction. Thus, IoT not only improves operational efficiency through automation of business processes, but it allows users to nurture their relationship with their clients, feeding customer satisfaction and brand integrity. Underwriters and others can therefore move away from spreadsheet manual entry into more value added tasks.
Competitive Edge: GSS Analytix have seen a 80% increase in events that trigger a preventive/corrective maintenance action and the technology playing a significant role on new win quote and retention rates.
Data Retention: Digital data can be easily retained in a conformed way and readily accessible with appropriate permissions. This permits effective prioritisation of cases, activity and data analysis. It also enables compliance with relevant regulatory requirements if data can be easily found.
Most individuals only define ROI by short-term financial savings. Iain Wilcox suggested that market conditions are not yet conducive for widespread IoT adoption and the typical focus on short-term financial savings as a singular key performance indicator (KPI) further challenges IoT adoption and its true ROI.. The true value of data being collected is not considered further
supporting the view that holistic thinking about risk management ROIs is required. Specifically he argued there is currently no driver to bring data-first projects into the market. When interviewing clients, it was found that less than 10% use their real-time IoT data beyond micro tactile facility management. The value of real-time, geotagged data is not yet recognised within the commercial property market.
The way insurers understand ROI is too binary. Juan drew a parallel to the ROI from getting a degree. It is not simply the money you make from your job. It is more nuanced. It is the value of knowledge, the exposure, the networking, and other experiences you gain through university as well. It would diminish the university experience to define it only by the pay-check you receive afterwards.
Juan suggested that ROI should be considered as a scale. Simple to measure factors, such as electricity consumption, can generate immediately identifiable changes in financials. However, when dealing with complex risks, the scale of ROI metrics should align with the hazards and losses of a singular risk. By being flexible enough to move the ROI goalpost, the benefits of IoT can be appreciated wholly. It could be considered a mistake to try to implement a financial ROI into every possible insurable event.
Although, it is still difficult to put an ROI on something that never happened…Dr Avi Baruch argued that good insurance is based around a symbiotic relationship between the client and the insurer. IoT allows insurers to dedicate more time to client interaction supported by superior risk insights and IoT technology also makes clients more insurable. Insurers want clients who are focused on risk management; clients who support IoT will inherently be more insurable as a result. Having an IoT-positive attitude permits insurers to bring holistic and specific risk management solutions directly to their clients.
A shared purpose
Insurers and clients should use IoT towards a shared purpose that is established through a nurtured, collaborative relationship.
How does better client-insurer relationships maximise ROI? Having a shared purpose to reduce and mitigate risk on both the client and insurer end will reduce future loss through good risk management practices and behaviours. IoT is a capability to do just that. The insurer and facilities manager (for example) can work collaboratively via IoT and the real-time data insights and trends to design the best risk management plan for that office or factory or site. When risk is considered effectively, ROI for IoT will increase.
The ESG butterfly effect
IoT-centred changes to building management have environmental, social, and governance impacts on a company. This will improve ROI in unforeseen ways. Better understanding of commercial property risks directly impact the ESG metrics of that company on both a micro and macro level. Consider real-time occupancy monitoring in the post-Covid environment. With the number of employees present in an office varying week by week, real-time occupancy monitoring can be used to set consumption standards that better reflect office occupancy. For example, restricting energy use in less trafficked areas and smart alerts can notify companies when parameters deviate from the optimal zone.
IoT can consolidate the generation of an ESG-focused business model thereby improving the sustainability statistics for that building. Better managed buildings will over time generate a butterfly impact where improvements are felt on every ESG metric.
There’s also plenty of other smart cities editorials at IoT Insider’s sister publication, Electronic Specifier. And you can always add to the discussion at our comments section below or on our LinkedIn page here.
