One future that is becoming increasingly clear is a world driven by the rise of the Internet of Things (IoT) and big data, where risk is instantaneously aggregated, measured, predicted, interpreted and transacted through a steady stream of information sources transmitting information without computer interaction. That technological development offers new possibilities for risk data aggregation and interpretation and presents new risk and security challenges.
One particular IoT opportunity JLT Group sees concerns the retail broking industry, specifically. At its core, the proliferation and accessibility of information made possible by the rise of IoT creates a foundation to reset the retail insurance broking industry. These technologies have the potential to redefine the speed and frequency of how insurable risk is assessed, priced and sold.
Few examples from the IoT future world
First, Auto insurance will be transformed from a world of annual policy terms that in essence "mark up the cost of accidents" to insurance offers and transactions that are made in real-time to drivers based on instantaneous data coming from geolocation, weather and traffic patterns, vehicle informatics and driver experience. If a snowstorm is moving through Chicago at rush hour, the insurance rate would be much higher than a sunny weekend day in LA. The variable price of risk can be determined at a micro level, and the buying decisions will dictate if they are willing to assume the risk.
Weather risk
Another example is catastrophic weather-related risk. With the continued advancement in meteorology and real-time monitoring, the near future could see a spot market develop around catastrophic risk during an actual event. A company could use excess insurance markets to buy more insurance or buy an option for additional limits during a developing situation. The data available through IoT can define pricing in real time as the storm and corresponding risk develops. This will change how capital is deployed and also transform the role of risk management during crisis situations into a model more akin to currency hedges and derivative trading.
Already today, JLT Group's flood mapping is advancing big data and IoT through a flood model that aggregates government data from the past 40 years and combines with various external data sources to better model and predict flood risk on a property-by-property basis. This allows owners and insurance companies to identify the risk at each individual property and price the insurance accordingly.
This level of detail fundamentally shifts how companies assess risk and buy Flood insurance. Furthermore, this insight becomes part of the operational models of companies further refining their strategic decisions and investments.
The proliferation of wearable and personal technology, and the corresponding data and information, reflects yet another rapidly developing area of IoT. For instance, one of the primary challenges for risk management and mitigation is the definition of "Who or what is where?"
During a crisis, it is critical that the people and assets are identified and protected. Many companies have made considerable advancement in this area. For example, MOBSS has created technology that provides identity persistence and validation across any setting. This open up a world where companies can track their people and assets in real time, and using analytics, better understand the implications to improve operations.
Global stage
Another area of transformational change is with risk arising from international activities and IoT. In the technology-connected world, sovereignty and borders matter far less than before. The smallest company can compete and operate on the same level as the largest companies across the globe. IoT and big data begin to redefine the rules of trade and the underlying rules of risk. The ability to now view the entire system from a data perspective requires retail brokers to change their aperture and move beyond a world of localized risk to an interconnected world where each element is related and can have an affect on the entire system.
For instance, the smallest of supply chain interruptions can have ripple effects across an entire ecosystem, compounding a seemingly small issue into a problem that affects business income. Additionally, products' use of component parts opens up new risk, as they can become the access points for hackers and cyber criminals. Finally, the speed of political change is known almost immediately. Companies who can understand how this information affects the system will better respond and mitigate their risk. The interconnected world that clients operate requires the broker to mirror and have the same capabilities and reach.
Ending where we started, with the increasing expectations of customers, technology and information drive a new standard of possibilities for retail insurance brokers. Clients see the potential and demand that the broker understand the tools and capabilities of what technology can provide and also require discussions that intertwine technology with the insurance broking and management process.
The future of retail broking requires companies to understand and harness the power of data in real time to increase the efficiency of transactions, the relevance of product and client satisfaction.
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