I had the opportunity recently to chat with two leading Silicon Valley risk managers about the internet of things (IoT). John Schaefer is with Lam Research, a leading supplier of fabrication equipment to the global semiconductor industry. And Leslie Lamb is with Cisco Systems, the world’s largest designer and maker of networking equipment. Lam Research and Cisco are some of the companies making our interconnected planet possible, and John and Leslie are well positioned to give us a smart overview of the risks and opportunities IoT presents.
John offers a simple definition of IoT: devices connected to the internet. This covers an enormous and rapidly growing list of activities that are central to our work and home lives. The clear benefits to people and businesses include:
- improved safety
IoT opens the door for new products and new business models. It creates and captures data – lots of data – that will drive further progress in the way our world works.
The risks of course, are just as obvious. Critical business operations are increasingly internet-driven. Sensitive data that was once protected in a locked file cabinet can now be opened by anyone with computer file access. As we see hacking incidents become commonplace, internet security is a relative term. A world filled with drones, self-driving cars, health devices and robotics is a linked IoT world. As IoT links devices, it also links growing opportunity and growing risk in ways we cannot ignore.
Addressing Risk Through Dialogue
As insurance professionals grappling with these risk challenges, John, Leslie and I all use the same word to describe what we see as the most promising way forward. That word is dialogue.
This dialogue involves insurers, insureds, and risk advisors. And there is a lot to talk about:
- The application of sublimits
- Policy definitions that are outdated or unclear
- Exclusions that do not address today’s business model risks
- Gaps in coverage for non-physical property damage or business interruption exposures
This dialogue, happily, is also about insurance solutions and opportunities for new products. Consider the recent ISO endorsements to add drones to general liability policies. Or the smishing/social engineering protections being added to crime policies. As the future arrives, insurance can be ready to cover its new risks.
More work remains to be done of course. In his risk management role, John sees the need to work with the insurance industry to identify and shape the products that IoT will demand. He also sees the necessity of facilitating his organization’s response to the risks they face with IoT growth.
Again, the word dialogue came up. Leslie recommends bringing all the stakeholders in a company together to explore the impacts of IoT, including IT, risk management, product development, marketing, operations and finance.
Devices are connecting. It will take a connected approach to manage IoT risks.
Fortunately, risk professionals including John and Leslie are currently working with other industry leaders to help drive optimal coverage changes.
In the video above, John and I discuss the challenges and opportunities of IoT.
Click here to learn more about comprehensive cybersecurity from Willis Towers Watson.
Guest blogger Holly Daley is Senior Vice President and Client Advocate for Complex Risk & Tech/Media/Telecom, based in San Francisco. Holly joined Willis Towers Watson in 2013 as SVP, Complex Risk Practice.