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How an insurer can stay relevant in the age of data
The document discusses the evolution of the insurance industry in the age of insurtech, highlighting how technology can enhance the assessment, management, and transfer of risks. It emphasizes that all insurance entities must adopt insurtech strategies to remain relevant, and details the potential benefits of IoT-enabled insurance products. The author, Matteo Carbone, outlines various strategies for insurers to leverage data and technology to create value-added services for clients, thereby improving customer engagement and retention.
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How an insurer can stay relevant in the age of data
- 1. June 19th 2018 Howan insurer can stay relevant in the age of data Matteo Carbone Founder and Director, IoT Insurance Observatory @mcins_
- 2. 2 Why did wecome here? Insurance is about protecting the way people live Since 1347 Insurance has been a contract where someone promises to indemnify another against loss or damage from am uncertain event as long as premium is paid to obtain this coverage Insurtech can make the insurance sector stronger and therefore more capable of achieving its strategic goal: to protect the way people live! How can InsurTech help do this?
- 3. 3 Assessing, managing andtransferring risks are the core activities of an Insurer Insurtech is the “superpower” for assessing, managing and transferring risks
- 4. 4 All the insuranceplayers will be InsurTech It’s unthinkable for an insurance company today not to pose the question of how to evolve its own model by thinking of which modules within their value chain should be transformed or reinvented via technology and data usage I believe all the players in the insurance arena will be InsurTech, meaning organizations where technology will prevail as the key enabler of the achievement of their strategic goals
- 5. 5 I love insurance MatteoCarbone InsurTech Investor and co-funder • I’ve co-funded Archimede Spac (Special Purpose Acquisition Company) • The company has the objective to set-up of the first Insurtech Insurance Carrier of the Italian market - a new independent carrier for non-life non-motor bancassurance - characterized by an “InsurTech inside” strategic mode • It has raised €47M and is listed on the stock exchangesince May 21st
- 6. 6 Insurtech enabled products Archimede: Bancassurance, InsurTechinside Embedded technology in the value chain to “make better” the insurer’s job Set-up foreseen in the 2022 plan period Pervasive Insurtech approach enabling the whole insurance value chain Starting as add- on/ cross-selling on client-base Mixed «Open-platform core-satellite» Innovation model Stand-alone development Innovative distribution channel support API Bancassurance platform
- 7. 7 I love insurance MatteoCarbone 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 than 40 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
- 8. 8 The most pragmatic multiclientresearch 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
- 9. 9 The protection ofa connected home: how could it look in a few years? The prevention of the risks which could occur to the house Proactive actions to limit the damages and fix them The monetary reimbursement will be necessary only in case of a "service failure" For a monthly fee someone will offer the consumer:
- 10. 10 Will Insurers berelevant in this kind of future? ILLUSTRATIVE Supermarket Relevance Frequency Hair dresser Telecom operator Traditional insurer Doctor Dentist Social media Real estate agent Notary Search engine Bank Credit card provider Lower risks to cover, invisible insurance ancillary to a product purchase, …)
- 11. 11 My experience onIoT insurance Organization 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 +800 +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 800 hours discussing concrete experiences, best practices and pitfalls with the executives of the organization members of the Observatory
- 12. 12 Will Insurers berelevant in this kind of future? ILLUSTRATIVE Supermarket Relevance Frequency Hair dresser Telecom operator Traditional insurer Insurance Iot Doctor Dentist Social media Real estate agent Notary Search engine Bank Credit card provider Irrelevancy is only a choice for an Insurer, not his inevitable destiny! Insurance IoT is about connecting the insurance sector with clients and their risks Lower risks to cover, invisible insurance ancillary to a product purchase, …)
- 13. 13 Each Insurer cancreate and sell his own insurance IoT value proposition: insurance contract + IoT data + services The Insurance players have a unique competitive advantage vs any other IoT players: • Because the same data used to deliver services allows to improve the insurance activity (assess, manage and transfer risks) • This way IoT allows to create value on the insurance P&L • This value can be shared with the client creating a valuable bundle between insurance coverages and IoT solutions Value sharing Connected insurance pardigm The bigger the difference between insurance premium and service cost, the higher the potential of the insurance IoT approach
- 14. 14 Value Creation Levers IoT data canhave 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
- 15. 15 Earned additional servicefees A home insurance product with an additional annual fee for professional safety and security services (and devices rental), REAL CASE Safety/Security oRemote monitoring and emergency services to provide peace-of-mind Property services oConcierge with a platform of certified services providers to manage the house: ‒Home maintenance ‒Home services (cleaning, gardening, ironing …) Solar panel Lighting Intrusion alarm Heating/ cooling Thermostat Flower control Computers & electronics Mould detector Camera Refrigerator and freezer Fire detection Camera Lock Electric meter Vacuum cleaner Washing machine Heat exchanger integrated with optional property services offered “a la carte” by an ecosystem of partners
- 16. 16 The value creationframework Traditional bottom line Hardware Services IoT costs Service fees paid by the customer Contribution of partners
- 17. 17 Value Creation Levers IoT data canhave a extraordinary impact on the way you assess, manage and transfer risks 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 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
- 18. 18 Self-selected risks dueto 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 The value creationframework Traditional bottom line Risk self selection Service fees paid by the customer Partners contribution Hardware Services IoT costs
- 20. 20 RISK SELECTION: • Low-riskcustomer 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 Value Creation Levers IoT data can have a extraordinary impact on the way you assess, manage and transfer risks 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 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
- 21. 21 Enhanced the effectivenessof the claim evaluation and the efficiency of the claim process Crash dynamics reconstructed through telematics data are represented “near real time” to the claim handlers on their desktops Photo credit: UnipolSai REAL CASE
- 22. 22 The value creationframework Traditional bottom line Risk self selection Claims cost reduction Service fees paid by the customer Partners contribution Hardware Services IoT costs
- 23. 23 Value Creation Levers IoT data canhave a extraordinary impact on the way you assess, manage and transfer risks 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 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 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
- 24. 24 Nudged clients toless risky behavior Instant rewards to life policyholders for performed healthy behaviors REAL CASE
- 25. 25 The value creationframework Traditional bottom line Risk self selection Claims cost reduction Service fees paid by the customer Change of behavior Partners contribution Hardware Services IoT costs
- 26. 26 RISK SELECTION: • Low-riskcustomer 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 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
- 27. 27 Minimizing the premiumleakage 12.00 24.00 20.00 6.00 A cheap telematics auto insurance for teenagers, eventual night hour driving charged on top on their credit card by km REAL CASE
- 28. 28 The value creationframework 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 Risk 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 Change of behavior Partners contribution More accurate pricing Hardware Services IoT costs
- 29. 29 Who is themost reliable player for providing a bundle of an insurance contract and services? You are the most reliable player for providing a bundle of insurance coverages and services ! Source: SSI survey for the IoT Insurance Observatory, European markets (Italy, France, UK, Germany, Spain, Austria) Auto telematics insurance (insurance coverage + services) IoT home insurance (insurance coverage + services) 5%All the customers: Millennials: 8% 4% 7% 65% 54% 49%59%
- 30. 30 I believe (some)insurers will succeed in the IoT war and they will stay relevant in the life of their clients These insurers will create their insurance IoT proposition: insurance contract + IoT data + services Photo credit: Jay Byers
- 31. 31 I’m supporting thisevolution 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 proudto serve these 41 Prestigious Organizations with the North American and European IoT Insurance Observatories To join the Observatory feel free to write to matteo.carbone@iotinsobs.com