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Auto Insurers' Memento Mori

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Have auto insurers to die? ..or to become irrelevant?
It is not their inevitable destiny; it is only a choice.
Auto insurers can be proactive, take the bull by the horns, stay relevant and become frequent in the life of their customer

Published in: Economy & Finance
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Auto Insurers' Memento Mori

  1. 1. 1 Auto Insurers’ memento mori …remind that you have to die
  2. 2. 2 What are analysts telling you daily?  75% of the cars on the road will be autonomous by 2035  70% of the cars on the road will be driverless by 2040  Switch from personal auto insurance to product liability Driverless world  ADAS will reduce 45% of accidents by 2020  Total claims costs will fall by 50% in 15 years  80% of the traditional auto insurance business will disappear by 2040 Fading premiums  The new normal will be to pay a fee for the car usage  End of the car ownership Mobility as a service
  3. 3. 3 The driverless scenario will came Personal auto insurance will be compulsory for car owners for a long time, as long as cars have a wheel Conversion of car stocksCustomer acceptance Technology readiness Regulation Infrastructure readiness Cyber security The analysts’ expectations of level 5 autonomous cars
  4. 4. 4 Premiums will fade Claim cost reduction will be influenced by many other elements not only by car safety tech • Safer cars may not make safer drivers because they can adjust habits (higher distraction) • Safer cars don’t guarantee less accident because increment of miles driven may offset lower risk per mile • Higher severity can partially offset the frequency reduction The end (if any) of auto insurance is really far but you will have to deal with more pressure on your cost structure
  5. 5. 5 Mobility as a service is coming
  6. 6. 6 Will Insurers be relevant in this kind of future of mobility? ILLUSTRATIVE Supermarket Relevance Frequency Hair dresser Telecom operator Traditional insurer Doctor Dentist Social media Real estate agent Notary Search engine Bank Credit card provider Lower risks to cover, invisible insurance ancillary to a product purchase, …)
  7. 7. 7 How will the insurance of the mobility as a service look? A fleet policy • Corporate policy insuring all the vehicles Low premium • High retention of risk by the fleet manager (e.g. high deductibles) • Insurance seen only as cost to minimize Invisible • No relation with the final customer • No opportunity to cross sell
  8. 8. 8 I’m bringing you a different perspective because I love insurance Matteo Carbone Founder and Director of the IoT Insurance Observatory +11 years strategic consulting (former Principal with Bain & co.) InsurTech Investor and co-funder Keynote speaker and writer on insurance innovation Global InsurTech Influencer • This Insurance think tank has aggregated more than 50 international insurance groups, institutions and tech firms between Europe and North America • The initiative has three concrete outcomes: ‒ The most pragmatic multiclient research specialized in the insurance IoT domain ‒ One-to-one workshops dedicated to each member to discuss research outcomes ‒ Plenary symposiums with all the members together around the same table
  9. 9. 9 The most pragmatic multiclient research specialized in 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 I have created a think tank which provides the members access to the most relevant insurance IoT knowledge globally
  10. 10. 10 In 2017, I had more than 350 hours of discussions with the Observatory members around the globe Think Tanks One focused on the North American markets and one dedicated to the European markets 2 Organizations Involved hundreds of executives from almost 35 Insurance and Reinsurance Groups and 15 Tech players and Institutions 50 Plenary meetings 6 full days of keynote speeches, discussions, roundtable. A terrific networking opportunity 6 Hours of workshop More than 120 "one to one" workshops (meetings dedicated to each company which has joined the Observatory) >350 4 Business insurance areas addressed Unique research based on innovation thought leadership and insurance acumen on all insurance business lines
  11. 11. 11 Will Insurers be relevant in this kind of future? ILLUSTRATIVE Supermarket Relevance Frequency Hair dresser Telecom operator Traditional insurer Insurance Iot Doctor Dentist Social media Real estate agent Notary Search engine Bank Credit card provider Irrelevancy is only a choice for an Insurer, not his inevitable destiny! Insurance IoT is about connecting the insurance sector with clients and their risks Lower risks to cover, invisible insurance ancillary to a product purchase, …)
  12. 12. 12 One Observatory member has chosen to proactively address the threat of the mobility as a service Future of mobility: this Insurer has taken the bull by the horns! REAL CASE Roadside assistance, maintenance, crash support, and a bundle of other telematics based services Full coverage auto insurance with 0 deductible (personal line product priced on driver and car characteristics) For a monthly fee its tied agents are offering the consumer: A new car (with a 24/60 months contract)
  13. 13. 13 In this years, I have worked with players representing 70% of the international insurance telematics policies Auto telematics maturity level
  14. 14. 14 I believe (some) insurers will succeed in the connected car war and they will stay relevant in the life of their clients Each of you can be one of these successful insurers! They will orchestrate their own connected insurance platform using data to create value and will share this value with the customer to deliver superior value propositions They will maximize the value creation using the same date to activate many different use cases on the entire insurance value chain Value sharing Connected insurance pardigm
  15. 15. 15 I believe (some) insurers will succeed in the connected car war and they will stay relevant in the life of their clients Seriously, you can win that war! Some your competitors have already started this journey… Photo credit: Jay Byers
  16. 16. 16 Value Creation Levers SERVICES… -…based on sensor data to deliver enlarged value propositions for the clients orchestrating an ecosystem of partners -…concerning information about insurance coverage and insured risks IoT data can have a extraordinary impact on the way you assess, manage and transfer risks
  17. 17. 17 Earned additional service fees A home insurance product with an aditional annual fee for professional safety and security services (and device renting), integrated with optional property services offered “a la carte” by an ecosystem of partners REAL CASE Safety/Security oRemote monitoring and emergency services (all the solutions discussed before to prevent and mitigate insured risks) to provide peace-of-mind Property services oConcierge with a platform of certified services providers to manage the house: ‒ Home maintenance ‒ Home services (cleaning, gardening, ironing …) ‒ … Solar panel Lighting Intrusion alarm Heating/ cooling Thermostat Flower control Computers & electronics Mould detector Camera Refrigerator and freezer Fire detection Camera Lock Electric meter Vacuum cleaner Washing machine Heat exchanger
  18. 18. 18 The value creation framework Traditional bottom line Hardware Services IoT costs Service fees paid by the customer Partners contribution
  19. 19. 19 RISK SELECTION: -Low-risk customer acquisition due to the storytelling of the IoT insurance product -Improved quality of underwriting process based on sensors data (including constant insights on exposure) -Increased underwriting process efficiency Value Creation Levers IoT data can have a extraordinary impact on the way you assess, manage and transfer risks SERVICES… -…based on sensor data to deliver enlarged value propositions for the clients orchestrating an ecosystem of partners -…concerning information about insurance coverage and insured risks
  20. 20. 20 Self-selected risks due to product features An auto telematics value proposition focused on the claims monitoring has a terrific effect on the acquisition of low risk clients 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 REAL CASE
  21. 21. 21 The value creation framework Traditional bottom line Risk self selection Service fees paid by the customer Partners contribution Hardware Services IoT costs
  22. 22. 22 RISK SELECTION: -Low-risk customer acquisition due to the storytelling of the IoT insurance product -Improved quality of underwriting process based on sensors data (including constant insights on exposure) -Increased underwriting process efficiency LOSS CONTROL • Usage of the device information in order to anticipate claims management and improve reimbursement valuation • Initiatives acting directly in real-time on single situations to: -mitigate risks before damages occur -contain damages • LAE reductions • More accurate reserving Value Creation Levers IoT data can have a extraordinary impact on the way you assess, manage and transfer risks SERVICES… -…based on sensor data to deliver enlarged value propositions for the clients orchestrating an ecosystem of partners -…concerning information about insurance coverage and insured risks
  23. 23. 23 Enhanced the effectiveness of the claims evaluation and the efficiency of the claim process Claim dynamics reconstructed through telematics data are represented “near real time” to the claim handlers on their desktops Photo credit: UnipolSai REAL CASE
  24. 24. 24 As you know, claim cost is the big elephant in the room Insurer's body shops usage +100% Sources: IoT Insurance Observatory best practices Speed settlement +5% Material damage costs -11% Body injury incidence -18% REAL CASES
  25. 25. 25 The value creation framework Traditional bottom line Risk self selection Claims cost reduction Service fees paid by the customer Partners contribution Hardware Services IoT costs
  26. 26. 26 RISK SELECTION: -Low-risk customer acquisition due to the storytelling of the IoT insurance product -Improved quality of underwriting process based on sensors data (including constant insights on exposure) -Increased underwriting process efficiency BEHAVIORAL CHANGE -Indirect impact on risk level through: -positive behavior reinforcement (including gamification) -culture creation - Loyalty systems based on detected behaviors (retention of low risk clients) LOSS CONTROL • Usage of the device information in order to anticipate claims management and improve reimbursement valuation • Initiatives acting directly in real-time on single situations to: -mitigate risks before damages occur -contain damages • LAE reductions • More accurate reserving Value Creation Levers IoT data can have a extraordinary impact on the way you assess, manage and transfer risks SERVICES… -…based on sensor data to deliver enlarged value propositions for the clients orchestrating an ecosystem of partners -…concerning information about insurance coverage and insured risks
  27. 27. 27 Nudged clients to less risky behaviors Instant reward to life policyholders for performed healthy behaviors REAL CASE
  28. 28. 28 The value creation framework Traditional bottom line Risk self selection Claims cost reduction Service fees paid by the customer Change of behaviors Partners contribution Hardware Services IoT costs
  29. 29. 29 RISK SELECTION: -Low-risk customer acquisition due to the storytelling of the IoT insurance product -Improved quality of underwriting process based on sensors data (including constant insights on exposure) -Increased underwriting process efficiency RISK-BASED PRICING - More accurate rating: based on measured "quantity" and "level" of risk exposure - Value propositions more attractive to the customers BEHAVIORAL CHANGE -Indirect impact on risk level through: -positive behavior reinforcement (including gamification) -culture creation - Loyalty systems based on detected behaviors (retention of low risk clients) LOSS CONTROL • Usage of the device information in order to anticipate claims management and improve reimbursement valuation • Initiatives acting directly in real-time on single situations to: -mitigate risks before damages occur -contain damages • LAE reductions • More accurate reserving Value Creation Levers IoT data can have a extraordinary impact on the way you assess, manage and transfer risks SERVICES… -…based on sensor data to deliver enlarged value propositions for the clients orchestrating an ecosystem of partners -…concerning information about insurance coverage and insured risks
  30. 30. 30 Minimizing the premium leakage 12.00 24.00 20.00 6.00 Cheap telematics auto insurance for teenagers, eventual night hour driving charged on top on their credit card by km REAL CASE
  31. 31. 31 The value creation framework Incentives and discounts are ways of sharing with the customer part of the value created in order to deliver superior value propositions Traditional bottom line Risk self selection Claims cost reduction Service fees paid by the customer Bottom line with IoT Discount and incentives to the costumer Value sharing Intermediary additional remuneration Change of behaviors Partners contribution More accurate pricing Hardware Services IoT costs
  32. 32. 32 I’m supporting this evolution through the Observatory Objectives Scouting and rationalizing qualitative/quantitative knowledge on Insurance IoT Sharing a critical point of view of key trends and spreading innovation culture Encouraging members to discuss experiences and exchange ideas about innovation The scope 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 Health and life Industrial risks and workers’ comp Auto… Home and commercial property
  33. 33. 33 I’m proud to serve these 40 Organizations with the North American and European IoT insurance Observatory To join the Observatory feel free to write at matteo.carbone@iotinsobs.com Allstate Allianz Worldwide Partners Swiss Re Munich Re RGA SCOR Reale Group Chubb Vienna Insurance Group Sara Hartford Steam Boiler Aubay Sysdata InsurtechNews Portolano Insurers Re-Insurers Techs Others Covea IMA Assistance Wawanesa Neosurance Kirey Pioneer UnipolSai American Modern American Family Travelers UNIQA Group AmTrust Groupama Zurich Connect Economical Societe Generale Insurance Sonnet Novarica The Hartford ArchimedeIVASS Intellect Design ALD Automotive Zurich Microsoft

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