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InsurTech the game changer for motor insurance

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Car insurance telematics - the first mainstream InsurTech experience. More than 16% of Italian insured cars use telematics at the end of 2015

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InsurTech the game changer for motor insurance

  1. 1. Telematics – The game changer for Motor Insurance Matteo Carbone Principal, Bain Founder and responsible of the Connencted Insurance Observatory
  2. 2. I founded a think thank on telematics, connected insurance and innovation Matteo Carbone, 28 April 2016
  3. 3. I founded a think thank on telematics, connected insurance and innovation Matteo Carbone, 28 April 2016
  4. 4. 0 5 10 15 20% Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Telematics penetration on Motor third party liability contracts renewed and sold in the period Source: Bain elaboration on "Clausole sulla Black-Box: trend temporali e canali di selezione/controllo dei rischi", Marco Cosconati. Observatory on telematics connected insurance & innovation Insurance telematics is growing Note: Cars personal line (not included motorcycles, boats, trucks and commercial lines), representing 70% of the MTPL contracts Matteo Carbone, 28 April 2016 6 players with a penetration >10% 10 players with a penetration >10%
  5. 5. Source: Bain elaboration on "Clausole sulla Black-Box: trend temporali e canali di selezione/controllo dei rischi", Marco Cosconati. Observatory on telematics connected insurance & innovation Telematics penetration is correlated to the level of MTPL premiums Note: Cars personal line (not included motorcycles, boats, trucks and commercial lines), representing 70% of the MTPL contracts Telematics penetration by district – Q4 2015 Average district MTPL premiums Telematics penetration Matteo Carbone, 28 April 2016
  6. 6. <€400 51% €400-€500 21% €500-€600 13% €600-€900 13% >€900 3% Total 100% Telematics is not only for the highest premiums Source: Bain elaboration on "Clausole sulla Black-Box: trend temporali e canali di selezione/controllo dei rischi", Marco Cosconati. Observatory on telematics connected insurance & innovation Note: Cars personal line (not included motorcycles, boats, trucks and commercial lines), representing 70% of the MTPL contracts Market breakdown by MTPL premium level Telematics penetration 16% 26% 22% 18% 16% 13% Matteo Carbone, 28 April 2016
  7. 7. The client perspective ILLUSTRATIVE Source: Observatory on telematics, connected insurance & innovation MTPL + theft (discounted) + black box MTPL (discounted) + black box When the increase of value is positive and material, there is an effective use case for the client and a selling speech for the distributor Matteo Carbone, 28 April 2016
  8. 8. Why motor insurance telematics? “I am the Career Genie. I grant 3 wishes that help people along with their jobs.” “For my first wish, I would like safe drivers to buy my Motor insurance product” Source: From an Andrew Dart's article originally appeared in the Asia Insurance Review, September 2014 edition Image: Courtesy from cliparts.co "Genie, I'm an Insurance CEO" “It’s done, now you have the black box” Matteo Carbone, 28 April 2016
  9. 9. Average Traditional Black box Risky clusters Traditional Black box The insurer perspective: benefits on the insurance bottom line Source: Bain Experiences Claims frequency Matteo Carbone, 28 April 2016
  10. 10. Why motor insurance telematics? “I am the Career Genie. I grant 3 wishes that help people along with their jobs.” “For my first wish, I would like safe drivers to buy my Motor insurance product” “OK Genie, for my next wish, I want you to reduce claims costs and fraud – make my motor line of business really profitable” Source: From an Andrew Dart's article originally appeared in the Asia Insurance Review, September 2014 edition Image: Courtesy from cliparts.co "Genie, I'm an Insurance CEO" “It’s done, now you have the black box” “Your wish is granted, your claims handlers will receives the telematics data real time” Matteo Carbone, 28 April 2016
  11. 11. The insurer perspective: benefits on the insurance bottom line Source: Bain Experiences Matteo Carbone, 28 April 2016 Saving acheived controling the claims value chain >10% Claim cost reduction full potential >25%
  12. 12. Why motor insurance telematics? “I am the Career Genie. I grant 3 wishes that help people along with their jobs.” “For my first wish, I would like safe drivers to buy my Motor insurance product” “OK Genie, for my next wish, I want you to reduce claims costs and fraud – make my motor line of business really profitable” “OK Genie, for my last wish, I want to find a way charge more premium for dangerous drivers before they have an accident” Source: From an Andrew Dart's article originally appeared in the Asia Insurance Review, September 2014 edition Image: Courtesy from cliparts.co Leave-in telematics: a better way to manage the insurance business "Genie, I'm an Insurance CEO" “It’s done, now you have the black box” “Your wish is granted, your claims handlers will receives the telematics data real time” “Your wish is my command, you have a behavioral-based tariff” Matteo Carbone, 28 April 2016
  13. 13. OUTSOURCING POSITIVE IMPACT OF TELEMATICS ON BOTTOM LINE • Ability of box to auto-select risks and influence behaviors • Efficiency of information usage in the claims handling process • Usage of TSPs allowed to: - achieve relevant quick wins with limited investments and limited impact on the system - have direct access to innovation • Effectiveness of the commercial act which is maximized by: - Visual effect of the reach of the RCA discount - Explicit cost paid by the client (mix of rate, services and assistance premiums) • Remuneration to the intermediaries The best practices build the business case on the value sharing both with the clients and the intermediaries Traditional lifetime value Benefits for insurance bottom line Services & assistance rate Customer discount TSP Lifetime value telematics Company LTV Telematics business case 1 1 2 3 5 2 3 5 4 4 ILLUSTRATIVE Intermediary INTERMEDIARY COMMITMENT Source: Bain Experiences Matteo Carbone, 28 April 2016
  14. 14. Frequency of interaction Source: Bain/Research Now Global Insurance Customer Centricity Survey 2013 2 ILLUSTRATIVE Lifetime value telematics Traditional lifetime value Benefits for insurance bottom line Services & assistance rate Customer discount TSP Lifetime value telematics Company LTV Telematics business caseInteraction & NPS Matteo Carbone, 28 April 2016
  15. 15. Frequency of interaction Motor insurance services benchmarking 2 Weather alert based on geo- localization 5 Antitheft service if the box registers a different-than- usual driving style 3 "Live" concierge supporting navigation 1 Alert if the vehicle exits a "safe area" (or enters an "unsafe area") of the city, defined by the client (e.g. parental control options) 4 Highway/ parking area tolling 6 While driving In case of crash When parked Road or medical assistance via dedicated button 7 Simplified claim notification, including automatic form fill-in based on telematics data 8 Damages Photo Claims feature Claim certification at client's disposal Automatic assistance to the client on the premises in case of severe accident9 10 11 Client assistance and personalized case management in case of crash Parking localization Street sweeping alerts Alert if the car is hit when parked Antitheft service if the box is removed/ uninstalled Alert in case the vehicle is moved when the engine is off (e.g. tow-away) 14 15 16 13 12 Stolen vehicle recovery 17 Source: Observatory on telematics, connected insurance & innovation Alert in case speed limits are exceeded 2 Matteo Carbone, 28 April 2016
  16. 16. Basic black-box PAYD PHYD 0 20 40 60 80 100% 10 Premium adjustment 17 9 At renewal At renewal Premium adjustment Tariff benchmarking – March '16 Number of products Source: Observatory on telematics, connected insurance & innovation Telematics is not (only) Usage Based Insurance Market offer evolution Number of products Flat discount Matteo Carbone, 28 April 2016
  17. 17. Why risk-based pricing? Premium adjustment based on the behaviors, with a mechanism understandable and communicable Risk-based pricing to offer a competitive renewal rate to the low risk client, in order to retain them and improve the technical profitability of the auto insurance telematics portfolio To make clients less risky To make clients less risky To retain low risk clients To retain low risk clients • How to engage the client? • Is a discount on the insurance rate at renewal enough? • Other reward could be used? • Which variables are really effective to identify the low risk clients? • With the discount diffusion on the low risk clients, how to manage the technical equilibrium of the part of the portfolio without telematics? Source: Observatory on telematics, connected insurance & innovation Matteo Carbone, 28 April 2016 To introduce new pay- per-use proposition To introduce new pay- per-use proposition • Is this what the consumer want? • Who is the target client? • Which is the correct distribution channel to distribute it? New value propositions based on innovative (and fair) model with variable payments along the year based on the actual personal level of risk
  18. 18. The insurer can keep more value with use cases based on a broad suite of services and rewards Economics telematics to be Traditional lifetime value Cross selling Discounts/cash back to the client Fee for ecosystem of partners Fee for the intermediary Lifetime value telematics LTV for the Company Benefits on the insurance bottom line Services & assistance fees Source: Observatory on telematics, connected insurance & innovation Matteo Carbone, 28 April 2016
  19. 19. The insurance usage of the telematics technology is far to the maturity Source: Observatory on telematics, connected insurance & innovation Matteo Carbone, 28 April 2016
  20. 20. The lack of a clear strategy limit the achievement of the full potential of the telematics Costs Data management complexity Privacy Lack of a clear strategy Barriers to the telematics development 11% 34% 22% 34% Source: Observatory on telematics, connected insurance & innovation Matteo Carbone, 28 April 2016
  21. 21. Telematics strategy Value proposition What strategic goal to achieve by introducing connected insurance? How to position the product within the current product offer? What target client to reach? Strategy first! Hardware and operating model •Which user experience at sales point? •What pricing approach to introduce at underwriting and renewal? •What services and loyalty systems to include in the product? •How to leverage the communication channel with client? • Which data and how structure the data gathering approach? • What devices and which delivery user experience? • How to evolve processes to strengthen the effectiveness of the impacted Company functions? (e.g. claims, actuarial, UW…) • How to capitalize on the cumulated experiences and activate a path of continuous improvement? Matteo Carbone, 28 April 2016
  22. 22. Matteo Carbone Matteo.carbone@bain.it +393346220378 @MCins_ Matteo Carbone, 28 April 2016

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