September 20, 2017
Smart Cities, Smart Choices for Insurers
The concept of smart cities is gaining momentum; many cities around the world are developing strategies and implementing projects.
It seems as if everything in the world is becoming “smart” – with intelligent devices and artificial intelligence automating activities and providing new capabilities. There are thousands of examples of “things” that contain embedded sensors or chips that generate information and enable control through apps or automated actions. These come together as part of the Internet of Things (IoT) in various ecosystems – such as smart homes, connected cars, smart farms, and many others. One of the most significant new ecosystems developing has to do with smart cities. The concept of smart cities is gaining momentum, and many cities around the world are developing smart city strategies and implementing specific projects. In fact, it is becoming evident that smart cities are catalysts for the movement to a connected world.
See also: Smart Things and the Customer Experience
SMA’s recent research report, Smart Cities and Insurance: Exploring the Implications, provides a definition for a smart city. It also profiles leading smart cities around the world, identifies specific benefits and projects underway, discusses how each insurance line of business will be affected, and identifies insurers that are already involved in smart city initiatives. Since the concept means different things to different people, SMA has developed a broad definition:
“A smart city is one that is leveraging connected world technologies to gather, analyze, and act upon real-time data to improve the lives of citizens; enhance mobility; create safer environments; optimize energy consumption and waste management; and contribute to the urban center of the future.” Strategy Meets Action 2017
The findings of the SMA research reinforce the potential for smart city solutions:
- As the global population continues to migrate to cities, smart city solutions will become more and more essential.
- The smart city movement is in full swing in many cities around the world, with hundreds of use cases that have important implications for insurers.
- Mobility, sustainability, and public safety are today’s top areas of focus for the smart city movement.
- Global insurers such as AXA, Allianz, Zurich, and Swiss Re are already engaged in smart city initiatives.
- Every line of business in insurance will be affected as new risks emerge, existing risks are amplified, and opportunities for new insurance products increase.
See also: How Smart Is a ‘Smart’ Home, Really?
Smart cities may seem like a far-off dream with limited implications for insurance in the next few years. It would be a mistake to take this view. Over half of the world’s population already live in cities, and that percentage will inevitably increase. Some cities already have dozens or scores of smart projects underway, many of which are aimed at reducing vehicle accidents, thwarting crime, improving health, avoiding or mitigating losses to property due to a variety of perils, and many other areas that will result in reduced risks. At the same time, the introduction of new technologies may introduce new risks or increase certain existing risks (like cyber-risk). All in all, it is imperative that insurers take active roles in collaborating with cities and smart city organizations in the reshaping of the modern city.