The IoT market is projected to be worth upwards of $1.7trn by 2020 and the message from AIG’s Rudi Spaan yesterday was clear: ‘innovate or be extinct’

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Risk managers must embrace new technologies such as the Internet of Things (IoT) or their companies could cease to exist, warned Rudi Spaan, president and chief executive at AIG Hong Kong.

Spaan kicked off his presentation yesterday by asking delegates to consider the risks if they fail to invest in IoT.

“Will you be innovators or will you slowly become extinct because something happens around you and your business model is no longer valid?,” he asked.

“How are you addressing your chief executives and if you report to the board, how do you share with them what [IoT] is going to do to your company?”

The IoT market is projected to grow from $655.8bn in 2014 to $1.7 trillion in 2020, with a compound annual growth rate (CAGR) of 16.9%, according to the International Data Corporation.

But its economic potential could be greater than this.

AIG’s white paper, Internet of Things: Evolution or revolution, puts the upper economic estimate between $1.4 trillion per year to $14.4 trillion across all sectors globally – the current GDP of the European Union.

Furthermore, the sale of connected devices and services will come to about $2.5 trillion in 2020.

Beyond its economic potential, IoT has the potential to revolutionise traditional business models and provide companies with competitive advantage, Spaan suggested.

He said one of the most interesting benefits could be found in internet-enabled driverless cars. These vehicles could significantly reduce road fatalities – the 8th leading cause of death in the world – and save economies billions on medical cost. The US economy alone, for example, could benefit from $190bn-worth of savings, he said.

“There are real opportunities on how the IoT can help businesses prevent losses, become more efficient and hopefully make the world a safer place,” Spaan said.

“For us we see three potential areas that are of particular interest. IoT can improve safety, improve efficiency as operators and producers and improve productivity.”

Although the benefits of IoT are plentiful, the risks are unknown.

IoT is creating a lot of complex liability questions because the exposure is relatively young, Spaan explained.

Cyber security is also a key concern. Spaan cited the recent remote cyber attack on Jeep Cherokee, where vehicles came to a halt after security experts hacked into the car’s internet-enabled functions. The hack forced Fiat Chrysler to recall more than 1.4 million vehicles.