Why Insurers Are Starting to Pay for Project IoT Backbones

The construction industry has long been characterized by high levels of risk, from workplace accidents to supply chain disruptions. With advances in technology, however, new solutions are emerging to help mitigate these risks. One such solution is the use of Internet of Things (IoT) backbones in construction projects.

Before we dive into the specifics of IoT backbones in construction, it is helpful to first examine the issue of risk in construction.

Construction is an inherently risky industry with numerous hazards that can lead to accidents, injuries, inefficiencies and other negative outcomes. Additionally, construction projects often involve multiple stakeholders, including owners, developers, contractors, architects, engineers, subcontractors and suppliers, which adds further complexity. Historically, construction risk has been addressed through a combination of jobsite monitoring by staff, safety training, insurance, and other measures.

Despite these efforts, the construction industry continues to face significant risks, including property damage events, workplace accidents, supply chain disruptions, defects and delays. The traditional approach to risk mitigation in construction has proven inadequate in many cases, highlighting the need for new solutions.

What Is an IoT Backbone?

An IoT backbone is a framework that connects a wide range of devices, sensors and other components to a central platform – essentially acting as a digital operating system for the jobsite. In the context of construction, an IoT backbone can be used to collect and monitor data on everything from leak detection, worker movements, material and equipment performance to structural issues and unsafe site conditions. The IoT data helps construction firms make more informed and faster decisions about their projects, reduce risk and increase productivity.

By using these technologies, construction stakeholders can reduce, and even prevent, the risk of accidents, property damage and worker injuries, thus lowering the likelihood of insurance claims.

Advanced Monitoring, Lowered Risk

There are a wide variety of IoT devices and categories that are part of current IoT backbones being used in various industries, including construction. At times it seems like there is, or will be, an IoT device for every risk the jobsite faces. Here are a few of the most impressive categories we’ve identified to date:

Water IoT

Sensors that detect leaks and are combined with artificial intelligence systems that profile a baseline water usage by asset type. Auto-shutoff features are also incorporated into these systems, which can prevent a leak from turning into a high-severity claims occurrence.

Wearable IoT

Wearables such as smart helmets, clip-on devices and safety vests can be used to monitor worker safety and collect data on worker movements, biometrics and other factors. This data can be used to improve safety, optimize workflows and reduce the risk of accidents and injuries.

Environmental IoT

Environmental sensors can be used to measure temperature, humidity, air quality and other factors in a building or on a construction site. By collecting and analyzing this data, construction firms can optimize conditions for workers and equipment, reduce energy consumption and improve safety.

Concrete Monitoring IoT

IoT devices such as concrete maturity sensors can improve schedule efficiencies, reduce waste and contribute to carbon footprint offsets. Real-time strength, temperature and curing data around the status of the concrete curing process can optimize the efficiency and safety of the project.

Reality Capture

Workers, drones and fixed-placed cameras are being utilized to capture all things visual from the jobsite, including unsafe conditions, defective workmanship, defective design and jobsite progress. This data can be used to improve planning, optimize workflows and reduce the risk of errors, defects and delays.

These are just a few of the impressive IoT categories that are part of current IoT backbones being utilized in construction and the broader built environment. As IoT technology continues to advance, we can expect to see even more impressive categories and applications emerging in the future.

Insurers are beginning to recognize the value of IoT technology and the potential benefits it can offer by improving their profitability through lower frequency and severity of insured risks. As a result, some insurers are starting to pay for IoT backbones as part of their policies or risk management programs. Further, new managing general agents or managing general underwriters (MGAs or MGUs) are popping up that not only offer improved insurance terms but pay for the IoT devices.

Changing the Future of Risk

Insurers are beginning to use data collected from IoT backbones to inform their underwriting and risk management strategies. The insurer of the future is beginning to underwrite on real-time data, and even predictive data, as opposed to just the data of the past. For example, insurers can use data on worker movements, equipment performance and other factors to identify potential safety hazards and improve risk management strategies. This can lead to more accurate, real-time underwriting, better risk assessment and improved claims management.

Overall, while insurers are starting to recognize the potential benefits of IoT technology and may be willing to offer coverage or incentives for its use, the adoption of IoT backbones in construction and the broader built environment is largely being driven by the potential benefits it can offer in terms of risk management, efficiency, productivity and overall profitability.

If your risk management advisors and brokers are not identifying sources of insurance capacity that subsidize the cost of IoT backbones, you should consider seeking a more future-forward risk advisor.

Written by Chris Greene, VP, Strategy, Analytics and Knowledge

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