The Internet of Things (IoT) is frequently described, without exaggeration,  as the “second digital revolution”.

The “traditional” method of information processing within industry and government  entails sourcing information internally from research and investigation and externally from public sources, the internet and information suppliers. The information is stored in databases and used to  produce analysis and reports on the basis of which human decisions and action are taken.

The IoT works very differently – sensors and actuators are embedded in physical objects and linked  to computers and smartphones by wireless networks including 4G, Wi-Fi and Bluetooth for analysis and responsive action.

Networks which link data from physical objects to each other and/or the environment within which they operate can enhance decision making dramatically in every industrial, commercial and government context. The IoT is, therefore, unsurprisingly, a fast-growing market. It has been estimated that by 2020 there will be some 26 billion connected electronic items including wearable/implantable devices, driverless cars, mobile telephones and a number of domestic appliances from smart TVs, refrigerators to radiator thermostats and security systems.

The impact of the IoT is being taken very seriously. A report published by the UK government at the end of 2014 concluded that it has “… the potential to have a greater impact on society than the first digital revolution and expressed the UK’s objective as being to use the IoT to: enable goods to be produced more imaginatively, services to be  provided more effectively and scarce resources to be used more sparingly.”

The report  focused on and gave examples of the benefits of IoT in five key areas:  transport, energy, healthcare, agriculture and building:

Transport:

• London City Airport has placed sensors throughout the airport which are connected to a control centre that aggregates the data collected, so as to provide customers with accurate “doorstep to destination” information, thereby improving customer experience and passenger flow.
• Sensor technology should be able to anticipate vehicle collisions and automatically take evasive action, thereby helping to reduce their occurrence and severity.
• Insurers are already using internet enabled dongles to assess their insureds’ driving and the condition of their cars.
• Better sensors will increase the quality and value of supply chain data.

Energy

The IoT will:

• Reduce energy demand through the use of sophisticated smart meters connected to the grid.
• Facilitate more efficient exploitation of energy patterns.
• Drive innovation in the creation of new business models for the provision of energy services.

Healthcare

• The IoT can help shift healthcare from cure to prevention and give people greater control over decisions affecting their wellbeing.
• Telehealth – the delivery of health related services is increasingly feasible as a result of the rise of connected smart devices.
• Connected devices significantly increase the potential to gather more sophisticated data for use in epidemiological research.
• McKinsey predicts that 75% of all patients are expected to use digital services in the future, including medical apps, while 48% of healthcare professionals say they expect to introduce mobile apps to their practices in the next five years.

Agriculture

The IoT  will:

• Help to maximise yield through precision and automated farming to overcome issues that limit crop yields such as difficult weeds.
• Enable more efficient use of scarce resources.
• Livestock sensors will give early warning of injury and disease.

Building

• Sensors are increasingly being used to gather information about movement, heat, light and use of space both to make near real time alterations to a building’s environment and for use in designing subsequent buildings.
• Buildings connected to the IoT could create significant opportunities for energy optimisation and predictive maintenance.
• Sensing and actuation in smart buildings is increasingly  connected through wireless networks. Measurements can include: human presence, temperature, humidity and light level.

Conversely, the IoT, like any new technology, will bring with it, its own set of new risks.  Across the spectrum of IoT, there are cyber risks arising from either human error or from hackers seeking to access and use personal data unlawfully. Software or hardware failure due to the introduction of viruses and the ensuing business interruption also poses a threat. The increased reliance on technology in the home – for example in running heating and lighting – and business, for example in controlling supply chains and stock for retailers will inevitably lead to some failures and claims arising as a result of those failures.

Written by Nick Gibbons, partner