In many regions of the earth's temperate zone, extreme heatwaves and droughts will put pressure on agriculture and forestry, limit the amount of cooling water that can be used for electricity generation and increase the risk of wildfires. Other parts of the temperate zones and the humid tropics are likely to see intense rainfall, leading to more frequent flash floods and river floods. One RCP, in particular, projects that the number of people exposed to a one-in-100-year flooding event (as measured in the 20th century) will increase fourteen fold. Severe thunderstorms and tropical cyclones are expected to increase in frequency and severity and rising sea levels are expected to impact coastal cities and their infrastructures.
For insurers, especially insurers in the property and casualty segments of the industry, this means the risks are increasing and their ability to accurately forecast these risks is declining.
How IoT will help insurers
IoT can help insurers collect data and provide services in new ways. But perhaps more importantly, Meagher says, IoT could allow insurers to completely transform their business models and go to market in a new way.
At their most basic, IoT sensors could detect when a frozen pipe has burst (or is just leaking), shut off the water supply and notify the homeowner. A smoke detector in your washroom could detect smoke and shut off your dryer (a leading cause of house fires), and a service could predict the path of a sudden hail storm and alert you to get your car under cover before it affects your area.
"We're seeing insurance companies realize that, actually, the IoT is going to be massively disruptive for them," Meagher says. "If somebody gets better data than they get, more intelligent information, they're going to be able to price better. They're starting to recognize that is some of the big boys [e.g., Google and Amazon] choose to attack the insurance industry because they've got access to data, data better than the traditional models, then they're in trouble."
As a result of that potential competition, Meagher believes that insurers will have to do more than give their customers incentives to hook up sensors to a smart home. Instead, savvy insurers will use IoT and smart home technology to overhaul their business models.
"In my view, in 10 to 15 years, you won't get home insurance unless you have a smart home," Meagher says. "You're already starting to see a whole bunch of interesting new business models sprouting up: Companies that don't sell insurance, they sell a smart home monthly subscription. The insurance is bundled in with the smart home services. They know if you have all these services, you're a low-risk customer."
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