The SENSE Consortium welcomed members of the commercial property and insurance industries to discuss the sizable challenges (and opportunities) posed by real-time data monitoring of risk via Internet of Things (IoT) devices, real-time data and the link with ESG.
“Is the missing link to IoT adoption for risk management actually ESG?” – how can the insurance industry be a leader in the adoption of real-time data to address ESG?
The rich discussion with industry experts – including David Johnson, principal of SERA Architects; Tassos Kougionis, Director of ESG, Sustainability and Net Zero at McBains; and Maarten Ectors, Company Director at Profit Growing Innovator Ltd – helped break down the topic of IoT adoption as it relates to ESG.
Whilst the insurance industry has signed up to ‘net zero’, committed to biodiversity goals and defined responsible underwriting; if ESG is going to become part of a new business as usual, there is a long way to go in terms of understanding and action to meet these imperatives.
The hypothesis discussed whether the topic of ESG could be significantly (positively) addressed if the insurance & commercial property industries adopt monitoring devices (IoT sensors) with advanced real-time data analytics and response protocols to address areas such as power/ water consumption and the indoor air quality.
What did the panellists have to say on the topic?
"Climate change is an existential threat to mankind. IoT is one of the few technologies which can provide real-time climate impact information as well as reduce emissions among other things.
Additionally claims related to escape of water, fire and theft can be substantially reduced. For this and many more reasons insurers should be all in on the Internet of Things."
Today, one of the biggest obstacles to large-scale adoption of Internet of Things (IoT) sensors remains the hesitancy on the part of the insurance industry to fully embrace it at scale despite the significant proof points on risk management benefits that these devices deliver alongside the ability to monitor indoor air quality, water and power consumption.
But why is this important in the first place? And, more importantly, what benefits can be gleaned from the wide adoption of IoT and real-time data for insurance organisations?
IoT data offers large-scale opportunities to link emissions for policyholders to the pricing of the product in commercial property.
A range of possibilities for new products that outwardly show the world insurance and commercial interests are aligned in their objective to reduce CO2 and other pollutants.
Early indications suggest that organisations who manage their ESG agenda well are a ‘better risk’ with a lower claims experience.
The ability of insurers to innovate quickly on legacy platforms and spaghetti architectures is quite limited – many new products can take as long as 18 months to come to market and to be put into production. IoT could help cut waiting times and ensure that new products and rates can be delivered and implemented with speed.
Insurance is an enabler to commerce, society and world commerce – insurance could have a disproportionate impact on emissions if pricing is really linked with good environmental emissions practices.
Bart Patrick, Chief Revenue Officer, Genasys
Insurance organisations that are quick to leap over the hesitancy hurdle would not only be setting an example, they would be driving and leading ESG change across a multitude of industries.
"Based on research undertaken by the SENSE Consortium, we know that the top three causes of loss within commercial property are fire, escape of water, and theft.
If as an industry we can unlock just two of those, very conservatively, at scale – this could have a $30 billion impact on our global economy. And that number doesn’t include ESG.”
Of the ‘E’, the ‘S’ and the ‘G’, more is understood and there is more action on the ‘E’. The potential positive impacts on social and governance aren’t sufficiently discussed and there is a lack of clarity around the ‘social’ and ‘governance’ side ESG presents and how or if IoT could provide an answer.
Perspectives on ESG being the lever to drive adoption of IoT….
The importance of sensors and data can’t be understated when it comes to the consistent and predictable results they will provide.
“What I’m seeing is a flight towards quality. It’s a flight from brown assets to green assets and we’re seeing this across all asset classes.
The way that we’re going to understand the difference between brown assets and green assets is going to be the ability to qualify and quantify the performance of those assets over time. To understand where they are now and where they are headed.”
Today, many ESG scores are typically an independent opinion of environmental, social, and governance risks facing an organisation and its shareholders, giving a snapshot at this point in time and (most likely) provides a call to action to improve. What these scores are not is an indicator of the organisation’s impact on people and planet.
Therefore, the ability to collect more (real-time) data to establish a common knowledge base is critical. Hard data is the foundation needed to start interacting with these independent observations and opinions to validate or otherwise and thereby enable improvements in ESG in the most effective way. IoT and real-time data delivers the ability to gather this hard data for subsequent analysis and action. A start to tackling the ‘G’.
“It is important to think of ESG as being good practice – one designed to optimise our processes.”
It will be through collaboration across the commercial property and insurance industries, finding common ground, to drive ESG behaviours.The insurance industry needs to work out IoT’s role in discovering opportunities to move forward and identify common goals.
The sooner we can go from this correlation of ESG to value, to causation, then we’ll get the evidence-based attention to really drive change.
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This event was sponsored by Genasys.
Genasys is a world-leading end-to-end policy and claims administration platform that has deployed insurers, MGAs, Brokers and TPAs. Genasys supports a wide array of companies with its state-of-the-art technology, delivering a better relationship between consumers and the process of buying insurance.
To learn more, visit: https://www.genasystech.com/