Does Insurance as a Service (IaaS) work?
The efforts of Insurers are being oriented more and more towards
associating auto insurance with services (based on telematics data)
The black box makes it possible for Insurers to enrich their auto insurance value
proposition by adding services built upon data provided by telematics. This is an element
to be taken in consideration when evaluating the overall ROI of a telematics program.
On the one hand, these services represent a way of de-commoditizing the car insurance
policy and are also a source of income. On the medium/long term, this characteristic will
become more and more important because of the de-risking trend in the MTPL business
–due to the technological progress when it comes to security and connected cars. On the
other hand, the delivery of these services is generating a growth in the number of
interactions with the client and it also helps in creating a richer connection between
company and client. This shift in the ways of interaction between client and Company
presents great potential and the evidence for this come from many customer satisfaction
surveys: there is a clear link between customer satisfaction and the level of interaction
with the Company. This is true both for Italy and at an international level.
Motor Insurance Telematics is mainstream in Italy
representing 15% of motor insurance sales and renewals.
In this new service “eco system”, Insurers will find themselves forced to co-compete
(that is collaborate and compete) with different actors which are active in connected car
sector. As seen in the above-mentioned examples, Italy is at the moment one of the most
advanced countries in terms of service development connected to telematics. This
creates the perfect conditions for the consolidation of approaches driven by the
Insurance Companies in a country where blackbox policies have become a mainstream
element (as opposed to niche): at the end of 2014 telematics have represented 15% of
motor insurance sales and renewals in Italy (reaching a peak of 40% in some areas of the
country), as underlined by the picture below based on recent statistics provided by
There are three macro categories when it comes to services:
1. Informational services related to the UBI (Usage Based Insurance)policy,
typically delivered through a smartphone app or a dedicated area on a website.
These services concern: quantification of pricing adjustment at the moment of the
contract renewal based on previous driving behavior; coaching and advices
regarding the style of driving; advices on how to save more while behind the
wheel; gamification approach that allows a comparison of one’s own driving style
with that of other friends. Canada-based company called Intact and Discovery
which is based in South Africa, can be considered among the most advanced
examples that currently use this type of approach. According to recent data made
available by a telematics service provider, 4 out of 5 clients owning a telematics
insurance policy check put their driver score at least once a month. Furthermore,
there is evidence that remote coaching programs can lead to concrete results in
modifying driving behavior.
2. Product offers related to the client’s own automobile - like Discoveryhas done
in South Africa with the Tires or the Allstate Rewards - orinsurance policies sold
“on the go” using data collected from the boxes installed on cars (reverse
geocoding). Tokyo Marine (Japan-based) - together with telephone operator NTT
Docomo - have implemented an innovative way of fruition of the insurance,
proving that impulse “cross-selling” of low-value insurance coverage is a valid
3. Services related to the customer journey experienced by the owner of a
An ecosystem of services for the owner of a connected car
driven by the Insurer.
The services for the connected car
There is a vast array of services that can be developed within the connected car
“ecosystem” and the technology is moving fast. There are new start-ups and innovative
business models popping up everywhere around the world. To cite just a recent Italian
example, there is WoW – a digital wallet created by CheBanca!- which have
integrated a parking payment service called Smarticket.it.
Focusing on services more close with the insurance offer, the value propositions could
be observed on the three stages of the customer journey:
• While driving. Services include services such as bad weather alert, speeding
alert, dedicated concierge and even an alert that is activated if the car leaves a pre-
defined “safe area” (family “control” options for young or old members of the
family). Discovery’s approach in this field is highly relevant and includes an anti-
theft service that signals to the client if the driver has a different driving style
compared to the usual one;
• In case of crash. Here the Italian market is considered to be an international best
practice because of how it has perfected the usage of telematics data to manage
services. Many Companies here have invested in creating a valuable customer
experience by involving partners specialized in assistance. The solutions provided
in case of an incident start with a proactive attitude in contacting the client and -
depending on the gravity of the event - continues with sending help directly at the
place of the incident and takes care of all the logistic and case management
problems that can arise. Innovation is now focusing more on simplifying the
FNOL (first notice of loss) procedure in case of car accidents. One such example
is Ania, Italian Association of Insurers, which has announced for 2016 the launch
of a new app meant to dematerialize the FNOL.
• When parked. Other than locating and recovering the car in case of theft, the
blackbox can send alerts when the vehicle is moved or damaged in any way. This
also allows to actually locate a parked vehicle. There are three Italian companies -
TUA, Cattolica, Cargeas – that have recently launched innovative value
propositions in this direction. One of the best practice on this way is the street
sweeping alert by Metromile.
Matteo is InsurTech Enthusiast, Insurance Thought Leader, Principal in Bain's
Finacial Service and Digital Practice.