Even in the insurance sector, we are in the age of post-truth. Here I demystify some of the telematics myths thought facts and figures.

1. September 6th 2018
Connected Car & Insurance
Views from the Observatory
Matteo Carbone
Founder and Director, IoT Insurance Observatory
@mcins_

2. 2
UBI offers are out of there for years
Leave-in
Roll-over
7.5 M telematics policies
at the end of ’16
3.5 M cars connected
with an Insurer on ’16
(penetration 1.4%)
This way to deal with connected cars has failed
Almost 6%
smartphone
based
“Let me take a look to your driving behaviors you for few month,
I give you a small discount today and you could save a lot of
money at the renewal”
Source: Connected Insurance Observatory
2017 SLIDE

3. 3
UBI offers have been out there for years
Leave-in
Roll-over
I’m sorry not to start with a message different from last September
“Let me take a look at your driving behaviors for a few months:
I’m giving you a small discount today (5%)
however you might save a lot of money at the renewal”
Source: IoT Insurance Observatory
8 M telematics policies
at the end of ‘17
4.4 M cars connected
with an Insurer in ‘17
(penetration 1.7%)
35%
smartphone
based

4. 4
However 2018 has brought us an Insurtech telematics unicorn
• Auto telematics insurance carrier (founded in 2015)
• $177.5M of funding, last round at $1B evaluation
-
3
6
9
12
15
Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18
Lemonade
Root
Quarterly gross written premiums ($M)

5. 5
Try-before-you-buy
1. A customer (not yet a policyholder) downloads
the app and fills-in his data
2. He drives and a driving score is calculated in 2-3
weeks of driving
3. He receives a quotation based both on his data -
the traditional ones - and his driving score
4. If he likes the proposed price for all the period of
coverage, he will purchase the policy and
become a policyholder
The Root telematics approach is not Usage-Based
Pay-per-mile
1. A customer purchases
the policy and
becomes a
policyholder
2. He plugs-in a dongle in
the car
3. Each month he pays a
different amount
based on the miles
driven plus a flat
monthly rate
Discount at renewal
1. A customer purchases the policy
with a small up-front discount
and becomes a policyholder
2. He plugs-in a dongle in the car or
downloads an app
3. He drives and a driving score is
calculated in a few months of
driving
4. He receives a renewal quotation
with discount based both on his
data - the traditional ones - and
his driving score
These 3 telematics approaches are completely different!

6. 6
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

7. 7
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

8. 8
My experience with IoT insurance
Organizations
In the past 6 years,
I advised more than 90 organizations (Insurer,
Reinsurers, Brokers, Vendors, and Investors) in
more than 15 different countries
on IoT insurance projects
90
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)
+80%
6 +900
+80 Conferences
I have debated the insurance IoT
opportunity at more than 80
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
(3 are to be published in the
following months)
Hours
More than 900 hours discussing
concrete experiences, best
practices and pitfalls with the
executives of the organization
members of the Observatory

9. 9
Telematics is
usage-based
insurance
Telematics 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
By 2020 the insurance Telematics
market will have grown exponentially
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting telematics 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 scoring
There is no ROI on
telematics, it is only
premium shrinking
To make insurance
telematics works insurers
need to work with OEMs
Typical phrases I have heard at those conferences
Customers don’t want
to share data with us

10. 10
14 million customers around the world have shared data with
their auto insurers around the word
7,10
4,41
1,09
Other
European
markets
US UKItaly Canada
0.35
South
Africa
Germany France
0.25
Spain
0.07
Other
markets
Total
0.53 0.20 0.13 0.10
14 M
Source: IoT Insurance Observatory estimates
Austria 0,05
Benelux 0,04
Russia 0,04
Switzerland 0,03
Denmark 0,02
Norway 0,01
Sweden 0,01
The problem is the offer (insurance products), not the demand (customers)

11. 11
Telematics is
usage-based
insurance
Telematics 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
By 2020 the insurance Telematics
market will have grown exponentially
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting telematics 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 scoring
There is no ROI on
telematics, it is only
premium shrinking
To make insurance
telematics works insurers
need to work with OEMs
Typical phrases I have heard at those conferences

12. 12
Nothing happens overnight in the insurance sector
Where do they expect to see the missing millions of telematics policies showing-up?

13. 13
Telematics is
usage-based
insurance
Telematics 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
By 2020 the insurance Telematics
market will have grown exponentially
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting telematics 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 scoring
There is no ROI on
telematics, it is only
premium shrinking
To make insurance
telematics works insurers
need to work with OEMs
Typical phrases I have heard at those conferences

14. 14
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)
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

15. 15
Telematics is
usage-based
insurance
Telematics 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
By 2020 the insurance Telematics
market will have grown exponentially
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting telematics 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 scoring
There is no ROI on
telematics, it is only
premium shrinking
To make insurance
telematics works insurers
need to work with OEMs
Typical phrases I have heard at those conferences

16. 16
Both in Italy and South Africa insurers are selling the
customer telematics based services with an annual fee
Source: Connected Insurance Observatory
Automatic assistance
to the client on the
premises in case
of severe accident
Simplified claim notification,
including automatic form fill-in
based on telematics data
Claim certification
at client’s disposal
Short-time
theft cover
Parking
localization
Alert in case the vehicle is
moved when the engine is
off (e.g. tow-away)
Car’s hearth
rate monitoring
111213141516
Antitheft service if the box
is removed/uninstalled
While
Driving
In case of
crash
When
parked
Weather alert based on
geo-localization
4
Alert in case speed
limits are exceeded
2
Highway/parking area
tolling
6
Road or medical assistance via
dedicated button
8
Client assistance and
personalized case
management in case
of crash
9
10
17
Bodyguard for emergency
outside the car when parked
Stolen
vehicle
recovery
Alert if the car is
hit when parked
18
19
20
"Live" concierge
supporting navigation
1 3
Antitheft service if the
box registers a different-
than-usual driving style
5
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)
Risks on
usual routes
warning
7

17. 17
Telematics is
usage-based
insurance
Telematics 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
By 2020 the insurance Telematics
market will have grown exponentially
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting telematics 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 scoring
There is no ROI on
telematics, it is only
premium shrinking
To make insurance
telematics works insurers
need to work with OEMs
Typical phrases I have heard at those conferences

18. 18
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

19. 19
Telematics is
usage-based
insurance
Telematics 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
By 2020 the insurance Telematics
market will have grown exponentially
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting telematics 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 scoring
There is no ROI on
telematics, it is only
premium shrinking
To make insurance
telematics works insurers
need to work with OEMs
Typical phrases I have heard at those conferences

20. 20
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

21. 21
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

22. 22
Telematics is
usage-based
insurance
Telematics 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
By 2020 the insurance Telematics
market will have grown exponentially
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting telematics 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 scoring
There is no ROI on
telematics, it is only
premium shrinking
To make insurance
telematics works insurers
need to work with OEMs
Typical phrases I have heard at those conferences

23. 23
Repeat
weekly
Drive event-free for
100 consecutive
kilometers
Event-free
driving for
100km
Achieve your
driving goal
Get
rewarded
Trip Score = 80
Minute = 50
Km = 30
Trip Score = 87
Minute = 75
Km = 50
Trip Score = 65
Minute = 35
Km = 25
Upload telematics data by Friday
23:59 for the week’s trips to
count towards the week’s score
Trip
01
Trip
02
Trip
03
MONDAY WEDNESDAY THURSDAY
INSTANT REWARD
A free coffee, smoothie
or parking voucher for
every 100 consecutive
kilometers of event-
free driving (one
reward a week)
Discovery Insure have use telematics to influence the driver
behavior by rewarding them with a cup of coffee or a smoothie

24. 24
Telematics is
usage-based
insurance
Telematics 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
By 2020 the insurance Telematics
market will have grown exponentially
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting telematics 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 scoring
There is no ROI on
telematics, it is only
premium shrinking
To make insurance
telematics works insurers
need to work with OEMs
Typical phrases I have heard at those conferences

25. 25
They 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

26. 26
Telematics is
usage-based
insurance
Telematics 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
By 2020 the insurance Telematics
market will have grown exponentially
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting telematics 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 scoring
There is no ROI on
telematics, it is only
premium shrinking
To make insurance
telematics works insurers
need to work with OEMs
Typical phrases I have heard at those conferences

27. 27
The value creation framework
Traditional
bottom line
Service
fees paid
by the
customer
SERVICES

28. 28
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

29. 29
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
Telematics
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

30. 30
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
Telematics 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

31. 31
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

32. 32
I’m extremely proud to serve these Prestigious Organizations with
the North American and European IoT Insurance Observatories
To join the Observatory feel free to write to matteo.carbone@iotinsobs.com