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IoT & Insurance

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Let's demystify the IoT insurance fake news.
Lesson learned through the work with more than 100 insurers, reinsurers and tech players in 15 different countries.

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IoT & Insurance

  1. 1. November 30th 2018 IoT & Insurance: Entering the age of post truth Matteo Carbone Founder and Director, IoT Insurance Observatory Co-founder, Archimede @mcins_
  2. 2. 2 Telematics is usage-based insurance IoT Insurance is about how to collect data to find a profitable underwriting formula It’s is impossible for an insurer to charge fees to customers for services Even in the insurance sector, we are in the age of post truth Customers don’t want to share data with us Converting IoT data into actionable insights is still a wish… we are not yet ready to make smart actions Telematics are not able to select risks better than the credit score There is no ROI on Insurance IoT, it is only premium shrinking To make insurance IoT works insurers need to work with OEMs, GAFA… Let’s spoil the following presentations of today and tomorrow
  3. 3. 3 My experience with IoT insurance Organizations In the past 6 years, I advised almost 100 organizations (Insurer, Reinsurers, Brokers, Vendors, and Investors) in more than 15 different countries on IoT insurance projects 100 Market share I’ve worked directly with players accounting for more than 80% of IoT insurance volumes (number of policies on auto telematics, smart home, and connected health/life) +80% 6 1000 +90 Conferences I have debated the insurance IoT opportunity at more than 90 conferences around the word since December 2015 Papers I have produced 6 white papers on Insurance IoT, which have been co-authored with prestigious international organizations (of which 3 are to be published in the following months) Hours Almost 1000 hours discussing concrete experiences, best practices and pitfalls with the executives of the organization members of the Observatory
  4. 4. 4 Telematics and insurance IoT are my passions Matteo Carbone InsurTech Investor and co-funder Founder and Director of the IoT Insurance Observatory +11 years strategic consulting (former Principal with Bain & co.) Keynote speaker and writer on insurance innovation Global InsurTech Influencer • This Insurance think tank has aggregated more almost 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 I’m helping incumbents to concretely address the IoT opportunity
  5. 5. 5 I have created a think tank which provides the members access to the most relevant insurance IoT knowledge globally The most pragmatic multiclient research specialized in the insurance IoT domain based on a constant observation on the usage of sensors in different insurance business lines around the globe We interpret best practices and pitfalls for the members leveraging an experience built advising almost 100 different organizations in more than 15 countries on IoT insurance project The knowledge is delivered through workshops dedicated one-to-one to each of the organizations which are members of the Observatory and plenary symposiums both in North America and Europe Observer Interpreter Storyteller
  6. 6. 6 Telematics is usage-based insurance IoT Insurance is about how to collect data to find a profitable underwriting formula It’s is impossible for an insurer to charge fees to customers for services Even in the insurance sector, we are in the age of post truth Customers don’t want to share data with us Converting IoT data into actionable insights is still a wish… we are not yet ready to make smart actions Telematics are not able to select risks better than the credit score There is no ROI on Insurance IoT, it is only premium shrinking To make insurance IoT works insurers need to work with OEMs, GAFA… Let’s spoil the following presentations of today and tomorrow
  7. 7. 7 Discovery have brought the Vitality approach almost 20 different countries and attracted +19M users… Source: Discovery
  8. 8. 8 …ad they have even launched a mobile-only bank which is based on behavioral data Source: Discovery
  9. 9. 9 Customers are ready Source: SSI surveys for the IoT Insurance Observatory, US Customers (homeowners) What about you? 27,9% 18,2% 14,3% 15,7% 20,9% 29,6% 37,5% 38,8% 28,6% 33,1% 29,6% 31,8% 26,5% 28,6% 29,2% 7,8% 6,1% 14,3% 7,6% 5,0% 9,1% 14,3% 12,9% 9,2% 50-64 100100 18-34 3 2 1 Definitely I’ll purchase it 100 Over 64 4 100 USA 5 Not interested at all 100 35-49 3.4% What do you think about a home insurance policy offering a security/safety system with an additional annual service fee of $240?
  10. 10. 10 Telematics is usage-based insurance IoT Insurance is about how to collect data to find a profitable underwriting formula It’s is impossible for an insurer to charge fees to customers for services Even in the insurance sector, we are in the age of post truth Customers don’t want to share data with us Converting IoT data into actionable insights is still a wish… we are not yet ready to make smart actions Telematics are not able to select risks better than the credit score There is no ROI on Insurance IoT, it is only premium shrinking To make insurance IoT works insurers need to work with OEMs, GAFA… Let’s spoil the following presentations of today and tomorrow
  11. 11. 11 More than 99% of the current global insurance telematics policies receive data form aftermarket devices or apps Source of telematics data By number of policies (global market end of 2017) SMARTPHONE 14% OBD 26% WINDSCREEN 3% SELF INSTALLED 22% PROFESSIONALLY INSTALLED 35% Some insurers have developed their after- market connected insurance strategy while you were waiting for the OEM data
  12. 12. 12 Who is the most reliable player for providing a bundle of an insurance contract and services? As of today, you are still the most reliable player for providing a bundle of insurance coverages and services! Source: SSI surveys for the IoT Insurance Observatory, US Customers Auto telematics insurance (insurance coverage + services) IoT home insurance (insurance coverage + services) 13%All the customers: Millennials: 23% 5% 8% 56% 70% 59%50%
  13. 13. 13 Telematics is usage-based insurance IoT Insurance is about how to collect data to find a profitable underwriting formula It’s is impossible for an insurer to charge fees to customers for services Even in the insurance sector, we are in the age of post truth Customers don’t want to share data with us Converting IoT data into actionable insights is still a wish… we are not yet ready to make smart actions Telematics are not able to select risks better than the credit score There is no ROI on Insurance IoT, it is only premium shrinking To make insurance IoT works insurers need to work with OEMs, GAFA… Let’s spoil the following presentations of today and tomorrow
  14. 14. 14 Many insurers are selling the customer IoT-based services with an annual fee REAL CASES A pet insurance providing a tracker, preventive treatments and the right monthly food needed by each dog A home insurance product with additional fees for telematics services (and devices rental) Auto value proposition enlarged with a suite of services telematics based
  15. 15. 15 Telematics is usage-based insurance IoT Insurance is about how to collect data to find a profitable underwriting formula It’s is impossible for an insurer to charge fees to customers for services Even in the insurance sector, we are in the age of post truth Customers don’t want to share data with us Converting IoT data into actionable insights is still a wish… we are not yet ready to make smart actions Telematics are not able to select risks better than the credit score There is no ROI on Insurance IoT, it is only premium shrinking To make insurance IoT works insurers need to work with OEMs, GAFA… Let’s spoil the following presentations of today and tomorrow
  16. 16. 16 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 Even if two customers seem to be equal based on their characteristics. The one who accepts the telematics value proposition is 20% less risky
  17. 17. 17 Telematics is usage-based insurance IoT Insurance is about how to collect data to find a profitable underwriting formula It’s is impossible for an insurer to charge fees to customers for services Even in the insurance sector, we are in the age of post truth Customers don’t want to share data with us Converting IoT data into actionable insights is still a wish… we are not yet ready to make smart actions Telematics is not able to select risks better than the credit score There is no ROI on Insurance IoT, it is only premium shrinking To make insurance IoT works insurers need to work with OEMs, GAFA… Let’s spoil the following presentations of today and tomorrow
  18. 18. 18 Reinvented the claim process through the usage of telematics data 10:40 09/06 10:43 10:58 11:40 13:00 09/07 …Assistance on site, collection of additional information First contact with the client for assistance, start of claim management and responsibility definition Adjuster operation in the preferred body shop (geo-located), with crash information shared with the adjuster Prompt definition of the exposure Digital customer interactions and claim tracking Eventual medial visits, with crash information shared with the doctor … Adjudication and negotiation leveraging the objective information obtained form the telematics data Settlement and payment$$$ REAL CASES
  19. 19. 19 Enhanced the effectiveness of the claim evaluation and the efficiency of the claim process Who here thinks that this is a tool which will bring benefits to your claim handlers’ activities? Please raise your hand Photo credit: UnipolSai REAL CASE
  20. 20. 20 Telematics is usage-based insurance IoT Insurance is about how to collect data to find a profitable underwriting formula It’s is impossible for an insurer to charge fees to customers for services Even in the insurance sector, we are in the age of post truth Customers don’t want to share data with us Converting IoT data into actionable insights is still a wish… we are not yet ready to make smart actions Telematics is not able to select risks better than the credit score There is no ROI on Insurance IoT, it is only premium shrinking To make insurance IoT works insurers need to work with OEMs, GAFA… Let’s spoil the following presentations of today and tomorrow
  21. 21. 21 Discovery Insure have use wearable data to influence life policyholder for healthy behaviors by rewarding them with a cup of coffee or a smoothie
  22. 22. 22 Telematics is usage-based insurance IoT Insurance is about how to collect data to find a profitable underwriting formula It’s is impossible for an insurer to charge fees to customers for services Even in the insurance sector, we are in the age of post truth Customers don’t want to share data with us Converting IoT data into actionable insights is still a wish… we are not yet ready to make smart actions Telematics is not able to select risks better than the credit score There is no ROI on Insurance IoT, it is only premium shrinking To make insurance IoT works insurers need to work with OEMs, GAFA… Let’s spoil the following presentations of today and tomorrow
  23. 23. 23 These are the same kind of benefits achieved with the adoption of the credit score decades ago 02 01 03 04 If he like the proposed price for all the period of coverage, he will purchase the policy and become a policyholder He drives and a driving score is calculated in 2-3 weeks of driving He receives a quotation based both on his data - the traditional ones - and his driving score A customer (not yet a policyholder) download the app and fill in his data TRY-BEFORE-YOU-BUY INSURER ECONOMIC BENEFITS Positive selection Attracting the best risks for each pricing level (leaving the worst to the competitors) Premium leakage reduction Having all the policies underwritten with a more accurate price (smaller clusters) The usage of a driving score at the underwriting stage is NOT usage based insurance
  24. 24. 24 A full stack insurtech which is based on this approach has already achieved the unicorn status • Auto telematics insurance carrier (founded in 2015) • $177.5M of funding, last round at $1B evaluation - 5 10 15 20 25 30 35 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Lemonade Root Quarterly gross written premiums ($M)
  25. 25. 25 Telematics is usage-based insurance IoT Insurance is about how to collect data to find a profitable underwriting formula It’s is impossible for an insurer to charge fees to customers for services Even in the insurance sector, we are in the age of post truth Customers don’t want to share data with us Converting IoT data into actionable insights is still a wish… we are not yet ready to make smart actions Telematics is not able to select risks better than the credit score There is no ROI on Insurance IoT, it is only premium shrinking To make insurance IoT works insurers need to work with OEMs, GAFA… Let’s spoil the following presentations of today and tomorrow
  26. 26. 26 The value creation framework Traditional bottom line Service fees paid by the customer SERVICES
  27. 27. 27 The sustainability of these kind of models is enbled by the ability to orchestrate the partners’ contributions Jun-11 Dec-11 Mar-15 Sep-11 Dec-15 Mar-12 Jun-15 Jun-12 Dec-14 Sep-12 Mar-13 Dec-12 Sep-15 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Number of Insured veicles >200,000 cars Discovery scaled-up its telematics book with a value proposition based on the promise to receive back up to 50% of monthly gas spending
  28. 28. 28 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 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 Risk reduction Partners contribution More accurate pricing Hardware Services Telematics costs SERVICES RISK SELECTION LOSS CONTROL BEHAVIORAL CHANGE RISK-BASED PRICING
  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 claim 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 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 I’m supporting this evolution through the Observatory
  31. 31. 31 I’m extremely proud to have served these prestigious organizations through the IoT Insurance Observatory on 2018 To join the Observatory feel free to write to matteo.carbone@IoTinsObs.com

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