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IoT: What’s in it for the customer?
Matteo Carbone
@mcIns_
London, June 13
#InsurIoT
The background of the thoughts I will share with you today
Principal
@ Bain & Company
• Financial Service and
Digital Practices
• 12 years strategic
consulting experience
• Focused on insurance
and innovation
Insurtech
Influencer
• Speaker and writer on
insurance innovation
• Insurance Thought
Leader
• Top 50 InsurTech
Influencer
Founder of Connected
Insurance Observatory
• Responsible of the
Observatory on
Telematics, Connected
Insurance and Innovation
• Advisor of more than 50
international players on
Insurance IoT
50
#InsurIoT
Matteo Carbone
I founded a think thank focused on Insurance IoT
More than 45 players joined this first edition of the Observatory
Insurers
30 Insurers part of
Insurance Groups
representing 66% of the
P&C Italian insurance
market
Reisurers
3 primary International
Reinsures
30 3
Aiba Appian Aubay DigitalTech
Guidewire IRSA SYSDATA Vodafone Automotive
Belron
Portolano Cavallo
Studio legale
#InsurIoT
Matteo Carbone
Insurance IoT is not about things, is about connecting
insurance with people and their risks
Connected insurance:
Applications
Health Industrial risksAutomotive Building Life
insurance solution that provides the use
of sensors for collecting data on the state of an insured risk and
telematics for the remote transmission of the collected data and
their use on the Insurance value chain
Surce: Connceted
Insurance Observatory
#InsurIoT
Matteo Carbone
Black-box
More than 4 Millions of
insurance black boxes fitted in
the cars +4
Penetration
Telematics represent 16% of the
auto insurance contracts sold
and renewed at Q4 '1516%
Best practice
One of the main Italian insurance
Groups reached a penetration greater
than 40% on his auto insurance
portfolio
>40%
Insurers
26 Insurers are offering a motor
third part liability cover
telematics based on the Italian
market
26
Insurance telematics is mainstream in Italy
65% NOW!
65% of the Insurers at the Connected Insurance
Observatory have already seen a material impact of
telematics on the Italian auto insurance marketSource: Connected Insurance Observatory
#InsurIoT
Matteo Carbone
Who is the buyer of a insurance with black box?
#InsurIoT
Matteo Carbone
Source: Bain elaboration on "RCA e black box: analisi degli acquirenti", Sergio Desantis. Connected Insurance Observatory
Telematics penetration on MTPL policies by age
Age
Who is the buyer of a insurance with black box?
Source: Bain elaboration on "Clausole sulla Black-Box: trend temporali e canali di selezione/controllo dei rischi", Marco Cosconati. Connected Insurance Observatory
Note: Cars personal line (not included motocycle, 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%
#InsurIoT
Matteo Carbone
The client perspective
MTPL +
theft (discounted) + black box MTPL (discounted) + black box
When the value increase is positive and material, there is an effective use case for the
client and a selling speech for the distributor
#InsurIoT
Matteo Carbone
Source: Connected Insurance Observatory
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”
#InsurIoT
Matteo Carbone
The insurer perspective:
benefits on the insurance bottom line
Matteo Carbone, 28 April 2016
#InsurIoT
Matteo Carbone
MTPL
claims frequency
-20%
Surce: Connceted Insurance Observatory
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”
#InsurIoT
Matteo Carbone
The insurer perspective:
benefits on the insurance bottom line
Matteo Carbone, 28 April 2016
#InsurIoT
@mcIns_
+100%
Insurer's body shops usage
BOX
-11% average
cost of claims
Source: Connected Insurance Observatory
• Ability of box to auto-select risks and
influence behaviors
• Efficiency of information usage in the
claims handling process
• Reduced thefts claims
• Usage of external partners (TSP) 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
Value sharing with both clients and agents
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
2
3 5
44
Intermediary
#InsurIoT
Matteo Carbone
5
Source: Connected Insurance Observatory
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 to change
charge the behaviors of my clients improving over time my
profitability”
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”
“Your wish is my command, you have a behavioral-based tariff”
#InsurIoT
Matteo Carbone
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
The market was not focused on pricing telematics-based,
but the approached are becoming more sophisticated
Market offer evolution
Number of products
Flat discount
#InsurIoT
Matteo Carbone
Source: Connected Insurance Observatory
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
Make clients less risky
Retention
of 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?
#InsurIoT
Matteo Carbone
Other ways to change behaviors
Economics auto telematics
Traditional
lifetime
value
Partners
contribu-
tions
Discounts/cash back to
the client
Fee for ecosystem
of partners
Fee for the intermediary
Lifetime
value
telematics
LTV for the Insurer
Benefits on
the
insurance
bottom line
Additional
fees
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
Alert in case
speed limits are
exceeded
2
Highway/ parking
area tolling
6
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
accident
9
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
The insurer can
keep more value
with use cases
based on a broad
suite of services
and rewards
#InsurIoT
Matteo Carbone
Source: Connected Insurance Observatory
Connected insurance market adoption
requires defined sequential steps
Which is the best
way to do it for
my company?
Does the
approach make
sense?
There is a
ROI of the
use case?
•First pilots •Roll out on few
pioneers
•Pilot phases diffusion
over the 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
(eg: big data) and push
the selling phase
•Commercial offer
differentiation
•Telematics potential
fully understood and
increased commercial
push by all players
•Differentiating
solutions / providers
over top players
•Telematics approach is the
standard for the insurance
business
•Relationship consolidation
between top players and
providers, best practices
cross-country diffusion
#InsurIoT
Matteo Carbone
Incubation
phase
Growth
phase
Maturity
phase
Exploration
phase
Learning
phase
Source: Connected Insurance Observatory
Italian Market is starting the insurance IoT adoption
Where do you think the sector is so far in the race towards IoT implementation?
(business lines different from auto insurance)
The industry is already
embaracing this change
The next 12 months will
be critical
This is a long term goal
Not clear the applicability
It will never become reality
29%
45%
24%
2%
•
•
0%
#InsurIoT
Matteo Carbone
Source: Connected Insurance Observatory
House and health insurance are hot now
Will be the connected insurance the most relevant innovation in the next 12 months?
(business lines different from auto insurance)
(% of positive answers)
Surce: Connceted Insurance Observatory
#InsurIoT
Matteo Carbone
Insurers can incentivize IoT for consumers, ensuring both
parties get the most out of the partnership
Is this approach able to select a less risky
customer base for your life insurance product?
#InsurIoT
Matteo Carbone
Source: Connected Insurance Observatory
Strategy first!
What is the greatest challenge slowing insurance IoT adoption?
(business lines different from auto insurance)
Lack of a clear
strategy
38%
Customer
readiness
Privacy issues
Data
management
Implementation
costs
23%
18%
13%
7% Surce: Connceted Insurance Observatory
#InsurIoT
Matteo Carbone
Connected insurance is a journey,
not a destination
Surce: Connceted
Insurance Observatory
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?
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?
#InsurIoT
Matteo Carbone
Insurance IoT connects Insurer
with people and their risks.
Data is the new oil!
Matteo Carbone
@mcIns_
London, June 13
#InsurIoT

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Insurtech what’s in it for the customer

  • 1. IoT: What’s in it for the customer? Matteo Carbone @mcIns_ London, June 13 #InsurIoT
  • 2. The background of the thoughts I will share with you today Principal @ Bain & Company • Financial Service and Digital Practices • 12 years strategic consulting experience • Focused on insurance and innovation Insurtech Influencer • Speaker and writer on insurance innovation • Insurance Thought Leader • Top 50 InsurTech Influencer Founder of Connected Insurance Observatory • Responsible of the Observatory on Telematics, Connected Insurance and Innovation • Advisor of more than 50 international players on Insurance IoT 50 #InsurIoT Matteo Carbone
  • 3. I founded a think thank focused on Insurance IoT More than 45 players joined this first edition of the Observatory Insurers 30 Insurers part of Insurance Groups representing 66% of the P&C Italian insurance market Reisurers 3 primary International Reinsures 30 3 Aiba Appian Aubay DigitalTech Guidewire IRSA SYSDATA Vodafone Automotive Belron Portolano Cavallo Studio legale #InsurIoT Matteo Carbone
  • 4. Insurance IoT is not about things, is about connecting insurance with people and their risks Connected insurance: Applications Health Industrial risksAutomotive Building Life insurance solution that provides the use of sensors for collecting data on the state of an insured risk and telematics for the remote transmission of the collected data and their use on the Insurance value chain Surce: Connceted Insurance Observatory #InsurIoT Matteo Carbone
  • 5. Black-box More than 4 Millions of insurance black boxes fitted in the cars +4 Penetration Telematics represent 16% of the auto insurance contracts sold and renewed at Q4 '1516% Best practice One of the main Italian insurance Groups reached a penetration greater than 40% on his auto insurance portfolio >40% Insurers 26 Insurers are offering a motor third part liability cover telematics based on the Italian market 26 Insurance telematics is mainstream in Italy 65% NOW! 65% of the Insurers at the Connected Insurance Observatory have already seen a material impact of telematics on the Italian auto insurance marketSource: Connected Insurance Observatory #InsurIoT Matteo Carbone
  • 6. Who is the buyer of a insurance with black box? #InsurIoT Matteo Carbone Source: Bain elaboration on "RCA e black box: analisi degli acquirenti", Sergio Desantis. Connected Insurance Observatory Telematics penetration on MTPL policies by age Age
  • 7. Who is the buyer of a insurance with black box? Source: Bain elaboration on "Clausole sulla Black-Box: trend temporali e canali di selezione/controllo dei rischi", Marco Cosconati. Connected Insurance Observatory Note: Cars personal line (not included motocycle, 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% #InsurIoT Matteo Carbone
  • 8. The client perspective MTPL + theft (discounted) + black box MTPL (discounted) + black box When the value increase is positive and material, there is an effective use case for the client and a selling speech for the distributor #InsurIoT Matteo Carbone Source: Connected Insurance Observatory
  • 9. 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” #InsurIoT Matteo Carbone
  • 10. The insurer perspective: benefits on the insurance bottom line Matteo Carbone, 28 April 2016 #InsurIoT Matteo Carbone MTPL claims frequency -20% Surce: Connceted Insurance Observatory
  • 11. 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” #InsurIoT Matteo Carbone
  • 12. The insurer perspective: benefits on the insurance bottom line Matteo Carbone, 28 April 2016 #InsurIoT @mcIns_ +100% Insurer's body shops usage BOX -11% average cost of claims Source: Connected Insurance Observatory
  • 13. • Ability of box to auto-select risks and influence behaviors • Efficiency of information usage in the claims handling process • Reduced thefts claims • Usage of external partners (TSP) 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 Value sharing with both clients and agents 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 2 3 5 44 Intermediary #InsurIoT Matteo Carbone 5 Source: Connected Insurance Observatory
  • 14. 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 to change charge the behaviors of my clients improving over time my profitability” 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” “Your wish is my command, you have a behavioral-based tariff” #InsurIoT Matteo Carbone
  • 15. 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 The market was not focused on pricing telematics-based, but the approached are becoming more sophisticated Market offer evolution Number of products Flat discount #InsurIoT Matteo Carbone Source: Connected Insurance Observatory
  • 16. 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 Make clients less risky Retention of 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? #InsurIoT Matteo Carbone
  • 17. Other ways to change behaviors Economics auto telematics Traditional lifetime value Partners contribu- tions Discounts/cash back to the client Fee for ecosystem of partners Fee for the intermediary Lifetime value telematics LTV for the Insurer Benefits on the insurance bottom line Additional fees 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 Alert in case speed limits are exceeded 2 Highway/ parking area tolling 6 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 accident 9 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 The insurer can keep more value with use cases based on a broad suite of services and rewards #InsurIoT Matteo Carbone Source: Connected Insurance Observatory
  • 18. Connected insurance market adoption requires defined sequential steps Which is the best way to do it for my company? Does the approach make sense? There is a ROI of the use case? •First pilots •Roll out on few pioneers •Pilot phases diffusion over the 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 (eg: big data) and push the selling phase •Commercial offer differentiation •Telematics potential fully understood and increased commercial push by all players •Differentiating solutions / providers over top players •Telematics approach is the standard for the insurance business •Relationship consolidation between top players and providers, best practices cross-country diffusion #InsurIoT Matteo Carbone Incubation phase Growth phase Maturity phase Exploration phase Learning phase Source: Connected Insurance Observatory
  • 19. Italian Market is starting the insurance IoT adoption Where do you think the sector is so far in the race towards IoT implementation? (business lines different from auto insurance) The industry is already embaracing this change The next 12 months will be critical This is a long term goal Not clear the applicability It will never become reality 29% 45% 24% 2% • • 0% #InsurIoT Matteo Carbone Source: Connected Insurance Observatory
  • 20. House and health insurance are hot now Will be the connected insurance the most relevant innovation in the next 12 months? (business lines different from auto insurance) (% of positive answers) Surce: Connceted Insurance Observatory #InsurIoT Matteo Carbone
  • 21. Insurers can incentivize IoT for consumers, ensuring both parties get the most out of the partnership Is this approach able to select a less risky customer base for your life insurance product? #InsurIoT Matteo Carbone Source: Connected Insurance Observatory
  • 22. Strategy first! What is the greatest challenge slowing insurance IoT adoption? (business lines different from auto insurance) Lack of a clear strategy 38% Customer readiness Privacy issues Data management Implementation costs 23% 18% 13% 7% Surce: Connceted Insurance Observatory #InsurIoT Matteo Carbone
  • 23. Connected insurance is a journey, not a destination Surce: Connceted Insurance Observatory 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? 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? #InsurIoT Matteo Carbone
  • 24. Insurance IoT connects Insurer with people and their risks. Data is the new oil! Matteo Carbone @mcIns_ London, June 13 #InsurIoT