Talking IoT and smart buildings with CNA

May 17, 2023 6:19 AM

Bret Martin, assistant vice president property risk control at CNA Insurance, spoke with Digital Insurance about the internet of things and the evolution of risk management. Martin has been in the industry for 37 years focused on risk control and property protection. He is a registered fire protection engineer and a certified safety professional.

The following responses have been lightly edited for clarity.

Can you tell me how risk management has changed in the past 30 years?

Believe it or not, the basics of risk management haven't changed. It still boils down to risk identification, event preparation, preparedness, and then response. The exposures change – we have what we refer to as emerging exposures. An example of that is the issue with lithium-ion batteries and the unique fire exposures they present. So the industry has to be adaptive and fluid to those emerging hazards that come along. But the basic principle of risk mitigation is the same.

How has technology played a part in mitigating some of those emerging risks?

A good example of technology that is helping us respond to risk would be water damage mitigation. IoT has come a long way in being able to provide plug and play type technology that will detect the water quickly, and then send texts, emails or alerts to those people that are responsible to respond to that event. So, this can dramatically decrease the amount of time for detection, as well as limit the loss associated with that leak, and help expedite the response programs needed to mitigate the damage.

The cost is relatively minimal to the amount of exposure that it can save with regards to property damage and business interruption. There are some devices out there where you pull the tab out of the battery, place it near a water source – like a water heater or under a sink – and that device only costs the insured anywhere from maybe $8 a month to $10 per month for the lease and monitoring.

What has made IoT more reliable for insurance purposes as it’s developed?

When IoT first came on the market, it was trying to utilize wireless technology, which is limited with regards to signal strength: you are dependent on WiFi technology that is connected to the internet and has a good strong signal. The devices sometimes just can't penetrate through brick walls or multiple layers of a building or stories of a building. With the newer technology, a lot of these IoT devices are cellular-based, which gives this equipment longer range and better strength, and more plug-and-play type technology, which is not dependent on internet connectivity.

What are the latest efforts for IoT at CNA?

For the past three years we've been running an IoT pilot. One of the things that we looked at when investigating different vendors was that accessibility to the data for the systems is really key for the end user. A good example is there are some IoT technologies out there that are using AI in order to assess the water consumption of a given building. So, you can use AI and IoT data to predict models of leaking, or overconsumption in a building. By using the AI data, an insured can identify overconsumption use that can ultimately not only save them utility costs, but also prevent large loss events.

In addition, one of our primary concerns was return on investment. And we needed to look at that. Without a doubt over this pilot period, we've been able to prove return on investment. The entire system could be paid [for] through one loss event.

Can you talk about the move to smart buildings?

Climate change also comes into play with regards to our resources. So, when a property is over-consuming water, gas or electricity that is identified through the use of IoT technology and AI, that's referred to as smart buildings and they are going to be the norm eventually for the primary reason of conservation. With the smart building technology that continuously monitors things like temperature, humidity, and water consumption or gas consumption, they can become more efficient and reduce that amount of consumption.

A smart building can be set up to recognize occupancy. So, given a high rise office building, we have similar smart technology already in the form of light sensors. When you walk in, you have a light sensor that will recognize someone in the space and turn on the light automatically. And when that space is vacated, that light will turn off automatically, saving power for that building. The same can be said for water systems and HVAC systems – the smart buildings will recognize when the building is being used. During unoccupied times, it can reduce the amount of utilities required for that building and space in the form of water consumption, electricity and HVAC.

To have a smart building, it really has to be integrated in the original construction of that building, you have to install your systems, your networks, you have to interconnect your equipment, such as your HVAC equipment, and your electrical lighting systems. So it really has to be incorporated early on. But we're seeing that as time goes on, there's a cost analysis benefit that shows that over the lifecycle of the building, there is a cost benefit to adding those IoT systems that makes it attractive to whoever's building it.

What are some other future insurance applications for IoT?

In risk mitigation and fire protection, the first efforts years ago were the invention of sprinkler protection, finding out a way to quickly detect a fire, and then quickly suppress the fire and because of the effectiveness eventually it got built into codes. So building codes were then updated to include requirements for sprinkler protection in certain occupancies. I don't think we'll see IoT technology expand to the degree of fire protection like smoke detectors and fire sprinklers. But I think it will become a mainstay in industry. It's going to be the norm because of the ease of installation of this technology, the operational reliability of the technology and the effectiveness of the technology, as well as the benefit.