Nick Spooner is a technology expert working with PricewaterhouseCoopers (PwC). In a blog, he posted on the Financial Standard, Spooner said insurance could soon become obsolete.
At the very least, Spooner notes, it will become unrecognizable in the near future. “For hundreds of years, the insurance industry has been inert. Its processes and products worked; it simply didn’t need to change. Insurtech is changing that. As fintech is doing to banking, Insurtech, the digitization of insurance, is transforming the insurance industry,” Spooner wrote.
His prediction goes something like the Internet of Things (IoT) — that interconnection of all devices from our cars to kitchen appliances — will make us so safe we won’t need insurance. “Connected smart devices will lead to less risk and smaller losses. For example, smart water heaters and pipes will alert manufacturers to a potential rupture before becoming critical. Result? Fixed pipes, hot water, dry carpets and no need to claim.”
Safer devices means the need for insurance goes away. “With less risk, the nature of insurance will need to change as traditional risk models cease to apply,” he added.
Apparently, Spooner hasn’t paid much attention to the danger of the Internet of Things. Stuart Madnick is a professor of all kinds of things at MIT. Earlier this year he wrote an article for Forbes and talked about the danger of the Internet of Things.
“Two years ago an internet-enabled refrigerator was commandeered and began sending pornographic spam while making ice cubes. Baby monitors have been turned into eavesdropping devices and there are concerns about the security of medical devices, such as computerized insulin pumps. In October, thousands of security cameras were hacked to create a massive Distributed Denial of Service (DDoS) against Dyn, a provider of critical Domain Name System (DNS) services to companies like Twitter, AirBnB, etc. Then there is the recent disclosure of CIA tools for hacking IoT devices, such as Samsung SmartTVs, to turn them into listening devices. These are only a few examples highlighting the threats,” he wrote.
Madnick said in 2016 there were 6.4 billion devices connected to the Internet of Things. By 2020 that figure will reach 20.8 billion. And Spooner doesn’t see the need for insurance or the danger and the risk of the Internet of Things?
In his article Madnick counters Spooner’s logic and says the IoT has lots of threats. “First, devices are taken over to do something they are not intended to do, like a security camera that becomes part of a botnet attack. But also, devices can be commandeered to do exactly what they are intended to do but in a devious way. Think of directing a self-driving car to drive off a bridge. Consider the cyber-attack on Iran’s nuclear enrichment centrifuges to make them rapidly speed up and then suddenly slow down (imagine pushing down hard on the accelerator, and then the brake in your car), which eventually seriously damaged them. That flummoxed operators who had never planned a response to prevent something like that because why would you do that in the first place?”
And Madnick says hackers continue to come up with new and creative ways to attack your IoT devices. There is a need for — in addition to better security measures by manufacturers — insurance and insurers.
“Cyber warfare is an evolving risk, but human nature is focused on the way things are supposed to work. This blinds us to the way things can be made to work. So how do you weigh the risk of something you’ve never seen before and something you’ve never thought of? It’s a cliché but I compare much of the approaches to addressing cyber security to people driving their car by looking through the rear-view mirror. That is, what will happen next year is likely very different than what happened last year,” Madnick wrote.
He says the biggest risk of all is consumers not changing — regularly — the passwords on the devices they have that operate on the Internet of Things. He liked that to leaving your door unlocked or wide open when you leave the house. “By changing passwords and taking other steps, consumers can get a layer of protection. It doesn’t mean an attacker can’t get through a locked door, but it is just so much easier to get through an open door,” he said.
Source links: Insurance Business America, Forbes