Will our homes become too smart for us?

Increased insurance risks posed by the Internet of Things

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The Internet of Things (IoT) - a term with which we are becoming increasingly familiar - refers to the interconnection of computing devices and sensors embedded into everyday objects. These objects include devices, vehicles, machines and even smart home appliances that constantly collect and exchange data via the Internet. 

Christelle Colman, Managing Director of Elite Risk Acceptances – a subsidiary of Old Mutual Insure says, “While this technology has the potential to greatly increase convenience in everyday life, IoT enabled appliances can also betray their owners presenting new insurance challenges.”

First generation IoT objects are very much a part of everyday life and the risk landscape is already changing as a result. These potential risks are especially relevant to the high-net-worth (HNW) market, since these individuals are generally known for being early adopters of high tech appliances and wearables that can connect to smart devices and online resources. Additionally, HNW individuals often install high-tech security measures – that can be monitored remotely – in their luxury homes.

As IoT becomes more widespread, the potential for cyberattacks increases significantly. According to cybersecurity firm, Kaspersky, attacks on IoT devices increased threefold in the first half of 2018 alone.  This is because the security on most IoT devices is still considered to be relatively weak in the face of ever-evolving cyber risks. 

Ransomware attackers now have one more medium to extort money from victims, with attackers taking to disabling a connected device at crucial moments when they cannot be reset or disconnected.  For example, a ransomware attack could shut down a home’s air-conditioning or security system while the owners are away on holiday, until a ransom is paid.

This is, however, not the most common form of cyberattack on privately owned devices, says Colman. “Taking control of connected IoT devices in order to mine cryptocurrency or to create a network of co-opted devices for illicit purposes, is also on the rise. Not only does this shorten the life of the device, but it can also significantly increase energy consumption and connectivity in someone’s home.” 

Still, individuals face an even bigger risk to their assets, as well as to their personal safety. Wearable tech, sensors in vehicles, and location-based sensors in home appliances and security systems all collect vast amounts of data about the users. Everything from personal preferences to daily and weekly routines is collected and the data is stored on cloud servers or “smart devices” that are connected online. It has also been demonstrated on numerous occasions that connected home security cameras can be hacked with surprisingly little effort. 

This means criminals could potentially predict an individual’s movements, zero in on their current location, or analyse their habits in order to identify opportunities. Referring to a home contents cover policy, Colman says this may even present some significant challenges at claims stage. “A theft where criminals may have known how to deactivate security systems and cameras, or knew exactly where to enter the property, may rouse the suspicions of an insurer and could even lead to the claim being repudiated.”

While most devices do not have adequate security in place, it is crucial that home-based routers and networks are equipped and maintained with the right level of security software, and that passwords are regularly updated. Remain cognisant of the fact that IoT devices are constantly collecting user data and become selective about the kind of data that is shared, as well as when and where IoT enabled devices are allowed to access the internet,” concludes Colman.

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