Will Brocklebank, founder & CEO of Shepherd
The industrial internet of things (IIoT) market is already estimated to be worth $146 billion, and that’s expected to grow to $232 billion in the next five years, according to researchers.
Perhaps a more striking way to put it is this: business research company Gartner estimated that by 2017, there were more connected things (8.4 billion) on the planet than people. By 2020 it expects there to be 20.4 billion. That includes a lot of consumer technology such as smart speakers, but also increasing numbers of sensors and devices for manufacturers and other businesses, which is where much of the growth will come from.
This year it is estimated that 60 percent of manufacturers will use connected products to capture and analyse data to run their businesses better. The technology is seeing significant adoption across industries, from healthcare and aerospace to refining and farming.
One area on which it has had surprisingly little impact yet, however, is facilities management, according to Will Brocklebank, founder and chief executive of Shepherd, a provider of risk analytics for property management and insurance.
“People are doing all sorts of clever data analytics for jet engines, production lines and in oil and gas. But the same thing doesn’t exist for the wider built environments and all those legacy assets, such as boilers, pumps, air- conditioners and compressors, that exist s all around us,” Brocklebank says.
Maintaining these remains labour-intensive and costly. It also results in significant losses for businesses and, consequently, their insurers.
“When something goes wrong in an office building or other business environment, you don’t usually find out about it when the component fails. You tend to discover it later, when you see a secondary effect —such as water dripping through the ceiling on to your desk,” he says.
A serial entrepreneur, Brocklebank founded and spent 10 years running a building management systems business (providing control systems for buildings’ heating and lighting networks) before setting up Shepherd.
Time is money in these cases. If businesses — or, more likely, their facilities managers —can spot components failing, they can address the problem before the knock-on losses in terms of physical damage and business interruption.
Given this, and the evidence from other sectors of its effectiveness, the case for using IIoT devices to monitor key equipment in facilities management seems convincing. Why more companies aren’t therefore using it, is an important question.
New role for insurance
Brocklebank will address this question in his speaking slot at the Intelligent InsurTECH Europe event, which will take place on October 15 in London.
As he will explain, part of the reason is a misalignment of interests: the big facilities management companies bid hard for contracts to manage big businesses’ premises – —sometimes even at a loss. Much of their profit comes instead from additional work to fix and repair equipment when it breaks down.
“The people looking after the day-to-day risk of these clients are not incentivised to avoid breakdowns —in fact quite the opposite,” he argues.
Solutions such as Shepherd’s provide competitors to the facilities management giants with the technology to provide comprehensive policies which not only take on responsibility for the facilities management, but also provide a commitment to fix or replace anything that goes wrong.
To do that, they require partners with strong balance sheets to support them with risk capital if this gets expensive. That is where the technology could really transform things.
“The vision is to have insurance bundled into the managed services contract,” explains Brocklebank.
At Intelligent InsurTECH Europe, he will be detailing the first step in turning that vision into reality: a new product protecting against the risks from Legionella bacteria and Legionnaires’ disease. Previously, the only way to manage the risk was to carry out monthly flushes of plumbing systems and periodic manual checks —both inefficient and error-prone. Consequently, insurers have shied away from extensive coverage.
Using IIoT technologies, however, Shepherd can monitor temperatures in the plumbing system, water storage and elsewhere to ensure the conditions Legionella need to colonise are avoided. And tThat reduces the risk sufficiently to give the insurer confidence to cover the costs, including the reputational harm and the cleaning if Legionella are detected.
Further down the line, Brocklebank sees the technology allowing facilities managers to provide service-based contracts, guaranteeing working equipment for a kitchen, for example. That could be combined with parametric insurance that would automatically pay out in the event of a breakdown, without the insured having to make a claim.
With the interests of all parties aligned towards keeping building operating and running well, it could benefit everyone, says Shepherd.
“Parametric insurance is often a dirty word with buyers, but we can use this sort of real-time data in a way that supports businesses rather than undermines them.”
Click here for more information on InsurTECH Europe, October 15, London.
Will Brocklebank, Shepherd, Intelligent Insurtech 2018, Insurtech, Internet of things, Technology, Insurance, Risk, London, Global