Only a few years ago, it was little more than a buzzword. A smart phrase to drop in to a presentation, but of little relevance to the daily management grind. Now the Internet of Things is a part of almost every modern business conversation.
Research company Gartner estimates that 8.4 billion connected devices will be in use worldwide by the end of 2017 and that total spending on Internet of Things (IoT) products and services will reach almost $2 trillion in 2017*.
Boardrooms and executives at all levels need to understand this bright new technology, appreciate the opportunities, but also how we manage the risks to make sure everyone benefits from IoT.
IoT is good for business
The IoT promises a benign new world of ease for the consumer, with internet connections built into everything from cars to healthcare devices and air-conditioning units to light bulbs but it is in business that it will have the greatest impact.
Businesses look set to deploy 3.1 billion connected items in 2017, according to Gartner. IoT opens up worlds of data to improve efficiency, provide smarter ways of working and make us more productive. We can now improve our products and make better commercial decisions faster than ever before.
There is more to come. The real impact of IoT will arise from the new ways of designing services and the enhanced understanding that this technology opens up. Businesses that get their hands dirty and start to experiment with what’s possible are the ones that will gain the knowledge to unlock the potential.
In short, the IoT promises business the sunlit uplands of efficiency, insight and control. But like all digital nirvanas, there will be downsides.
IoT is good for the insurance industry
IoT will continue to have a huge impact on the insurance industry. Advances in safety technology will affect things such as accident frequency, which could result in fewer losses and reduced premiums. For some time, insurance providers have been fitting devices into cars to measure driver safety and adjust premiums accordingly.
Drones are already in use to assess crops. Near-infrared imaging and Normalised Difference Vegetation Index sensing, which identifies living plants, enable farmers to isolate problems with their crops and make adjustments before ever needing to make a claim. IoT technologies can also evaluate weather and assess damage from natural disasters.
Connected wearables give the consumer greater control over their own health and well-being. Approaches like these are encouraging users to change their behaviour and, by extension, their exposure to risk.
However, a connected consumer lifestyle could also result in new types of risk – digital and data-related. We could eventually see a move in the insurance industry away from policies that insure products towards people-based cover. Rather than taking in information about how long a driver has been on the road, insurers could place greater emphasis on factors such as the places you tend to drive and the risk associated with them.
Being aware of the risks
Every new technology brings new crime, new dangers. With everything connected and more digital windows to break open, hacking becomes easier. And with this increased capability comes the need for enhanced security and monitoring.
Lawmakers are moving fast. The EU General Data Protection Regulation, which comes into force in May 2018, imposes strict obligations on data controllers and processors, and imposes hefty, turnover-based fines for breaches.
With privacy and cyber-fraud, IoT presents an increase in scale for existing risks. The losses are essentially financial, reputational or data-related.
But the IoT will also bring entirely new types of harm, which have yet to be fully understood by the insurance industry, policymakers and society. For devices connected to or controlling physical objects – from nuclear power plants to insulin pumps – a security breach might entail rather more than a financial loss. Recent big malware attacks have played havoc with Britain’s health service, but they have yet to take direct control of machinery.
So embedding security from the start is crucial. Secure network authentication, locally processed and encrypted data, and barriers within networks will be key to minimising these risks. Staff at all levels of an organisation need to be trained and vigilant.
The scope of IoT can only grow. The opportunity it presents is enormous for business and society – one that is too great to miss out on. However, stringent security measures should be put in place to safeguard customers and protect companies.
We cannot, however, step blindly into this new world. Businesses, politicians and regulators all have a part to play in safeguarding these new opportunities so that they benefit everyone. We need to talk.
Excerpt from Chatham House’s 4th issue of The Journal of Cyber Policy