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How are you connected?

Published: 19/11/15

The Internet of Things (IoT) is the network of physical objects or "things" embedded with electronics, software, sensors, and network connectivity, which enables these objects to collect and exchange data.

Zurich Insurance has provided an introduction to these new technologies and discusses how they are currently being utilised by small to medium sized enterprises.

It is reported that nearly five billion connected devices are now in use worldwide and this is predicted to rise to 25 billion by 2020, with more than eight billion of these devices expected to be used by businesses. Some experts predict that nearly half (45%) of SMEs will be using connected devices during 2015.

While connected devices can expose businesses to additional cyber risks, they also offer wide-ranging rewards. Zurich has highlighted three key benefits of connected devices for SMEs and these are: security and risk management, efficiency, and impact on insurance.

1. Security and risk management

Zurich’s latest SME Risk Index found one in six (16%) SMEs are using smart devices to monitor their business premises remotely, or expect to do so in the next 12 months.

Smart security cameras can learn a user’s normal movements and send notifications to their smart phone if anything out of the ordinary is detected.

Smart burglar alarms use motion detectors to identify intruders, and at the same time as triggering an alarm, can automatically call or text the user’s phone. Some security systems give users the option of switching on lights or music, or opening blinds, to spook intruders rather than setting off an alarm.

Connected devices can also protect property against other threats. For example, wireless humidity sensors can detect water leaks and identify the likely source of the problem.


Some connected devices can allow for automation of tasks, while others can intelligently programme themselves to increase efficiency.

For example, Google's Nest Thermostat will learn what temperature the user prefers at different times of the day, and within a week can be left to adjust automatically. This removes the need for human input, freeing up time for revenue-generating activities. It can also achieve a more efficient heating schedule, generating energy savings.

Manufacturing businesses are expected to become key beneficiaries of the IoT over the next five years, for example through devices that can detect whether a piece of machinery is operating correctly, or whether an item has been shipped to the correct destination.

3. Impact on insurance

Helen Jales, Head of Strategic Propositions at Zurich, believes “the real benefit of this technology is that it’s shifting risk from detection and control to prediction and prevention”.

She says: "Taking the example of a humidity detector, data showing the early signs of a water leak could be automatically shared with the SME’s broker or insurer. Action could then be taken to inform their customer, or even to mitigate the issue and prevent a loss ever occurring."

Helen says that brokers and insurers should work together to create propositions that take advantage of the IoT for the benefit of customers. This could include tailored risk advice and personalised premiums for customers who can prove they present a better risk.

Cyber risk

SMEs must be aware connected devices could increase their exposure to cyber risk, including denial-of-service attacks (see below), and theft of data.

The more connected devices there are in use, the more entry points exist for hackers, and the greater the number of functions a hacker might be able to control.

For example, if a hacker was able to access a security camera, they could monitor office movements, while gaining control of warehouse devices could give them access to sensitive customer or company data.

SMEs will need to look carefully at how best to manage the cyber risks associated with IoT, for example by only buying devices from reputable manufacturers, and installing the latest security software updates as they become available.

Denial of Service (DoS) attacks occur when cyber criminals bombard their victims’ networks with so much unwanted traffic that their machines or systems cease to function. Traditionally, malware-infected PCs have been used to launch such attacks, however cyber security experts say the Internet of Things (IoT) could be a soft target for attackers, because IoT devices are always online and do not always have strong risk management features.

Technology for the future

Zurich intends to follow the growth of IoT carefully, and Flint will naturally be involved in this process. We will need to examine how our customers currently use connected devices, including how they might be used them in the future, and what businesses would expect in return for sharing their data.

If you are utilising any form of new technology and need advice about security, including your insurance implications then please do not hesitate to speak to your Flint commercial insurance adviser on 0845 371 1452.

We are the professional advocate of our clients – so please let us help.

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