reflecting on the lessons learnt in the most mature ...€¦ · reflecting on the lessons learnt in...
TRANSCRIPT
September 27th 2017
Reflecting on the lessons learnt in the most mature connected insurance market
Matteo CarboneFounder and Director, Connected Insurance Observatory
@mcins_
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I love insurance
Matteo Carbone
Founder and Director of the Connected Insurance Observatory
+11 years strategic consulting (former Principal with Bain & co.)
Keynote speaker and writer on
insurance innovation
Insurtech investor
Global InsurTech Influencer (Top 3 InsurTech Influencer by InsurtechNews,
Top 3 InsurTech Influencer by Right Relevance,
Top 10 Insurtech Infuencer by Onalytica
Top 15 InsTech Influencer by InstechLondon,
Top 25 Disruptors in the Insurance Industry by Vertafore)
• An international insurance think tank focused
on IoT aggregating almost 50 international
insurance groups, institutions and tech firms
• The initiative delivers three concrete outcomes:
‒ the most pragmatic multiclient research
specialized on the insurance IoT domain
‒ one-to-one workshops dedicated to each
member to discuss the research outcomes
‒ plenary symposiums with all the members
together around the same table
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Connected insurance is about connecting the insurance sector with clients and their risks
The world will be more and more connected, you can not stop that
Any insurance solution based
on sensors for collecting data
on the state of an insured risk
and telematics for remote
transmission and management
of the data collected
Connected Insurance Today more than 1 connected device per person in the world
You can leverage those sensors or ignore them!
At 2025 more than 10 connected devices per person in the world
At 2050 …
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The IoT is definitely relevant for the North American insurance market but the sector is at an infancy stage
"Do you think that connected insurance will be a relevant technology for the North American insurance sector?"
93%yes
7%no
% of high relevance on
total respondents*
90%
40%
Market maturity
Incubation phase Exploration phase Learning phase
Auto
• First pilots focused on one use case • Some pilots
• Roll out by few pioneers
• Pilot phases by greatest part of players by using a "me-too" approach
• Only few top players understand telematics full potential (UW, claims, VAS), define their own approach (e.g. big data) and push the selling phase
• Differentiation of the commercial offers
HomeHealth
Life
Industrial risks and specialties
Source: Connected Insurance Observatory survey to the ACORD insurance members, February 2017
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I’ll talk to you about successful connected car insurance players, but I have before to ask you for the next 5 minutes to forget all you have heard about UBI since today
Because telematics is an extremely powerful technology
able to transform your journey…
…but you have seen it used onlyto go to the market
at the end of the street
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+100% Insurer's body shops usage
+5% speed settlement
BOX
-11% material damage costs
-18% body injuries incidence
Source: Connected Insurance Observatory
There were few insurers able to reinvent their claims processes leveraging the telematics data
Some snapshots from different best practicies
Up to 7% average
claims cost reduction
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There were many insurers able to select the risk with a telematics value proposition without any usage based tariff
Telematics deviceHardware to be installed on top to the battery for all the year (self-installing)
Insurance coverageAuto liability insurance coverage with
25% up-front flat discount*
ServicesCrash support and a bundle of other
services with an annual fee charged to the customer (50€)
The Insurer’s presence if there is a crash is a story telling attractive for the good customers…
…and allows to avoidthe bad ones
Market average(4,8%)
Market average(20%)
Claims frequency (district average)
Black box effect on
claims frequency(risk adjusted)
Black box impact by district
Market average
-20%
3.0 6.0 6.5%Market average
4,8%
4.5
* Only up to 5% additional discount based on mileage at the renewal
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There where insurers able to sell telematics policies without a material discount to the customer
3% 3%
48%40%
34%35%
13%17%
3% 5%
<€200
€200-400
€400-600
€600-900
>€900
Insurancemarket
Telematics policies
Annual auto insurance
premium paid 1250 € - 312 €
938 €50 € 988 €
Discount Discountedprice
FinalPrice
Client feeStartingprice
- 75 €225 €
50 € 275 €
Discount Discountedprice
FinalPrice
Client feeStartingprice
300 €
30% penetration
15% penetration
>40% of the 7 million Italians with an insurance telematics have chosen it for the services
Business case at the point of sale
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There was an insurer able to scale-up a telematics value proposition based on the orchestration of partners’ contributions
This solution succeeded in influencing behaviors and reducing the risk of the portfolio
Auto insurance coverage sold only with telematics, with insurance premium+ service fees paid by the
client
Each month up to 50% fuel cash back
based on the customer behaviors
A free coffee, smoothie or parking voucher for every
100 consecutive kilometers of event-free
driving
Each day the majority of trips are rated as five stars,
chance to win back theamount you spent filling up
Telematics auto insurance
Fuelcash back
Instantreward
5 stars draw
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Traditional
bottom line
Risk self
selection
Claims cost
reduction
Service fees
paid by the
customer
Bottom line
with telematics
Hardware
TSP
Telematics
costs
Discount, servicies
and incentives
to the costumer
Value
sharing
Intermediary additional
remuneration
$5-10 paid by the customer as monthly
fee
Those insurers were able to leverage the telematics data to create value
Change
behaviors
Partners
contribution
Incentives and discounts are ways to share part of the value createdCreating in this way attractive value propositions
The connected insurance paradigm is about using IoT data to create values on the insurance P&L and sharing this value with clients
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Value sharing
Connectedinsurancepardigm
12
The same paradigm is applicable to the other insurance business lines LOSS CONTROL
• Usage of the devices’ information to anticipate the claims management and improve reimbursement valuation
• Initiatives acting directly real time on the single situation to:
- mitigating the risk before the damage happens
- containing the damage
• LAE reduction
ValueCreationLevers
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Connected home insurance
Leaveo 0.3 cm crack generates almost 40 litres of water/hro It takes almost 2,500 litres to cover 100 sq metres
Thurs 9.30pm
Response
Mon 16:01pm
Incident
Thurs 16:00pm
Awareness
Mon 16:00pm
Resolution
Mon 17:00pm
Response
Thurs 16:05pm
Awareness
Mon 16:05pm
Resolution
Thurs 17:00pm
Result o Over a long weekend (73.5 hrs) 2,898 litres of watero Claim paid: >$2,000
Result o Responding within an hour only 40 litres of watero Claim paid: Immaterial
Traditional home insurance
THU
FRI
SAT
SUN
MON
Resolution!
Resolution!
Reduced the claim payed and enlarged the effectiveness and efficiency of the claim process
Water and frizzing damages mitigated or avoided with sensors installed in the home
Detection of production levels for a solar energy output insurance
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The same paradigm is applicable to the other insurance business lines
LOYALTY AND "BEHAVIOR-STEERING"- Indirect impact on the risk level through:
- positive behavior reinforcement (including gamification)
- culture creation
- Loyalty systems based on detected behavior
LOSS CONTROL• Usage of the devices’ information to anticipate the claims
management and improve reimbursement valuation
• Initiatives acting directly real time on the single situation to:
- mitigating the risk before the damage happens
- containing the damage
• LAE reduction
ValueCreationLevers
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Nudged your clients to less risky behaviors
Instant reward to life policyholder for healthy behaviors
Equipment breakdown deductible reduced when the maintenance and usage prescriptions are followed
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The same paradigm is applicable to the other insurance business lines
LOYALTY AND "BEHAVIOR-STEERING"- Indirect impact on the risk level through:
- positive behavior reinforcement (including gamification)
- culture creation
- Loyalty systems based on detected behavior
LOSS CONTROL• Usage of the devices’ information to anticipate the claims
management and improve reimbursement valuation
• Initiatives acting directly real time on the single situation to:
- mitigating the risk before the damage happens
- containing the damage
• LAE reduction
ValueCreationLevers
SERVICES…- …concerning information about the
insurance coverage and the insured risks
- …based on sensors’ data to deliver that allow the insurer to deliver enlarged value propositions to the client
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Earned additional service fees
A pet insurance providing a tracker, preventive treatments and the right monthly food needed by each dog
Home security and safety and a platform of services a la carte
Security/ Safety
o Remote monitoring and emergency services to provide peace-of-mind
Care
o Remote monitoring and assistance focused on specific health and wellbeing needs directly connected to households:‒ Chronic patients‒ Post surgery patients‒ Elders‒ Kids‒ Pets
Solar panel
Lighting
Intrusion alarm
Heating/cooling
Thermostat
Flowercontrol
Computers & electronics
Mould detector
Camera
Refrigerator and freezer
Fire detectionCamera
Lock
Electric meter
Vacuum cleaner
Washing machine
Heat exchanger
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The same paradigm is applicable to the other insurance business lines
RISK-BASED PRICING- Usage-Based Insurance:
pricing definition process based on "quantity" and "level" of risk exposure
LOYALTY AND "BEHAVIOR-STEERING"- Indirect impact on the risk level through:
- positive behavior reinforcement (including gamification)
- culture creation
- Loyalty systems based on detected behavior
LOSS CONTROL• Usage of the devices’ information to anticipate the claims
management and improve reimbursement valuation
• Initiatives acting directly real time on the single situation to:
- mitigating the risk before the damage happens
- containing the damage
• LAE reduction
ValueCreationLevers
SERVICES…- …concerning information about the
insurance coverage and the insured risks
- …based on sensors’ data to deliver that allow the insurer to deliver enlarged value propositions to the client
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Price defined by the current exposure
Worker compensation premium based on the number of employees present and the hours worked
Business interruption premium based on the current volume of production measured each month
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The same paradigm is applicable to the other insurance business lines
RISK SELECTION:- Low-risk customers acquisition due the
connected insurance value proposition
- Improved quality of the underwriting process based on the sensors’ data
- Increased the underwriting process efficiency
RISK-BASED PRICING- Usage-Based Insurance:
pricing definition process based on "quantity" and "level" of risk exposure
LOYALTY AND "BEHAVIOR-STEERING"- Indirect impact on the risk level through:
- positive behavior reinforcement (including gamification)
- culture creation
- Loyalty systems based on detected behavior
LOSS CONTROL• Usage of the devices’ information to anticipate the claims
management and improve reimbursement valuation
• Initiatives acting directly real time on the single situation to:
- mitigating the risk before the damage happens
- containing the damage
• LAE reduction
ValueCreationLevers
SERVICES…- …concerning information about the
insurance coverage and the insured risks
- …based on sensors’ data to deliver that allow the insurer to deliver enlarged value propositions to the client
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Attracted better risks than the market average due to the story telling of the value proposition
The health insurance products presenting incentive for physical activity are more appeal for the healthiest customer
Business owner adopting a connected workers’ comp have nothing to hide to his insurers
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Perform a new virtuous role for society by providing positive externalities for a sustainable society
Sustainability4
Connected insurance reasons way
Create and consolidate knowledge about the risks and the client base: discovering deeper insight into member feedback and
preferences that lead to next generation of products and services
Knowledge creation
3
Enhance proximity and interaction frequency with the client while creating new customer experience, increasing the retention and
expanding members relationship
Frequency of interaction
2
Improve insurance profit & loss through the five value creation levers usage and share part of this value with the client to increase the
adoption
Benefits onthe insurance bottom line
1
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Each of you can create your own connected insurance value proposition: insurance contract + IoT devices + services
I believe (some) insurers will succeed in the IoT war and they will stay relevant in the life of their clients
Photo credit: Jay Byers
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Goals Activities
I created a think tank for the insurance sector to support the innovation efforts on Connected Insurance
Scouting and structuring quali/quantitative knowledge
on Connected Insurance
Sharing a critical point of view of key trends and
spreading innovation culture
Encouraging stakeholders discuss experiences and
exchange ideas about innovation
1. Collection of evidences concerning connected insurance approaches
2. Researches on consumer expectation and on distribution of connected insurance products
3.Best practice analysis with market benchmark and international innovation scouting
4. Three annual collegial events in order to share with Observatory's Stakeholders ideas and experiences on connected insurance
5. 1to1 deep dive meetings (3 workshops along the year) with each Insurance Company to present and discuss the Observatory's research
The scope is all the uses of sensors within the insurance sector: auto, home, health, life, worker’s comp and industrial risks
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Many of the thoughts presented come from this think tank started with the Italian branches of European Insurers
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The scope evolved at European level due to the involvement of their headquarters and the onboarding of new players
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More than 30 organizations participated this year to the European Connected Insurance Observatory edition
AIBA
AlfaStrakhovanie Group
Allianz Worldwide Partners
Swiss Re
Munich Re
RGA
SCOR
Reale Group
Chubb
Vienna Insurance Group
Sara
Cardif
Guidewire
Vodafone
Aubay Sysdata
InsurtechNews
Do Different
Portolano
InsurersRe-Insurers
Techs
Others
Helvetia Assicurazioni
IMA Assistance
AVIPOP (AVIVA) Chiara
Groupama Assicurazioni
AXA Assicurazioni
Cloudera
Kirey Pioneer
UnipolSai
Cattolica
Zurich
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One member of the Observatory changed its telematics offer aligning the product to the best practices
Dic '15 Dic '16 June '1675% of the new auto insurance
business have been telematics based
Penetration on their own auto insurance book is almost at 30%
Telematics portfolio grown 3X
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Since March 2017, we started a second Observatory dedicated to the North American Market
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15 Organizations have already joined the North American Connected Insurance Observatory
Feel free to contact me to join the journey of those think tanks
+393346220378