IoT and System Downtime: What Insurers Should Know
In today’s digital age, glitches in technology can negatively impact the user experience and brand image, resulting in significant financial losses. For transportation companies, connectivity problems can be particularly critical, as they affect critical functionalities and safety. Internet of Things (IoT) devices collect real-world data and transmit it through specialized software to produce useful information. However, as IoT relies on Internet connectivity, system downtime is inevitable, and the transportation industry needs to be prepared to reduce resolution times and improve customer communication.
According to McKinsey, connected-car use cases could create over $550 billion in value by 2030, significantly more than the $64 billion generated in 2020. However, the expanding connectivity in transportation presents challenges in tracking the performance of transportation endpoints, i.e., the devices that connect to the network. For instance, tracking a fleet of trucks in remote locations with limited connectivity can be complicated, especially during times of high network latency or packet loss.
Furthermore, IoT devices are reliant on the cloud and the Internet, adding a layer of complexity to the digital supply chain. Therefore, ensuring high-quality networking across multiple networks, including the Internet, is crucial. System downtime in the transportation sector can be expensive, resulting in steep regulatory fees and labor costs. For instance, Southwest Airlines experienced several IT outages in 2022, putting pressure on the airline to avoid further travel chaos this year.
The broader digital supply chain issues can also be time-consuming and costly. For example, when Google Maps went down on August 9th, 2022, it took out several apps that rely on its API to deliver directions, including Uber and Lyft. Thus, it is essential to have the right technology in place to minimize disruptions.
To reduce system downtime, transportation companies need end-to-end visibility of the networks relaying real-time data from IoT sensors. Software agents can provide insights into potential impacts and in-depth analysis of downtime issues. This information can help operation teams understand how much downtime they are experiencing and where the issue is occurring, enabling better decisions on upgrading sensors, readers, software, and other IoT tools to improve reliability and performance management.
Parametric insurance, which pays out based on pre-agreed triggers such as weather conditions or power outages, could be a valuable tool for these companies to mitigate the financial impact of system downtime. By setting up a parametric insurance policy, businesses can receive a pre-determined payout when a specific trigger event occurs, without the need for lengthy claims processing. For example, a transportation company could purchase parametric outage insurance that pays out a pre-agreed amount if a certain percentage of its vehicles experience downtime due to an internet outage. This type of insurance can help transportation businesses reduce the financial burden of downtime, allowing them to focus on getting their systems back up and running quickly.
In summary, system downtime can cause significant financial losses in the transportation industry. To reduce the impact of system downtime, transportation companies should have end-to-end visibility of the networks relaying real-time data from IoT sensors. Software agents can provide insights into potential impacts, while telemetry data can support proactive maintenance and understanding of fleet health. Insurance can be seen as a complementary solution to have an additional safetly layer.
Read more What happens to IoT connectivity if there’s an outage? at Automotive World