Tag Archives: casualty insurance

How to Win the ‘Micro-Moment’

The P&C insurers that will win in our increasingly data-driven market are the companies that embrace the possibilities of technology and are able to own the “micro-moment”: Companies that reach consumers when they are making decisions and forming preferences will be ahead of the curve.

Communication technology now makes it possible for insurers to reach out to customers using automated voice, text, social media, email and other platforms. For example, when catastrophe looms, such as a major weather event, insurance companies have a great opportunity to protect policyholders and minimize losses by contacting customers.

This is not only good for the bottom line, because it avoids losses; it’s a great way to deliver an exceptional customer experience, which confers a competitive advantage. Insurance company executives instinctively see the value of using personalized communication to build loyalty and strengthen relationships. But not all companies are fully ready to take advantage of the possibilities of a closer connection with customers.

See Also: Data Science: Methods Matter

Executives worry about the quality and accuracy of the data they have on hand. That’s because many insurance companies only contact customers when processing a claim or following up on a late payment. Some use these opportunities to update their customer data, but since records verification only happens around transactions, a sizable portion of the company’s customer information is always outdated, and that can stymie efforts to own the micro-moment.

Take the connected catastrophe scenario, for example — because much of the customer base is always connected and has higher expectations around personalized communication than ever before, it makes sense to conduct customer outreach when a catastrophe is likely. By reaching out to customers, companies can contribute to customer safety, reduce losses and strengthen relationships.

A P&C company, with an insured population in the path of a hurricane or wildfire, might reach out via automated voice message, text, social media (e.g., Facebook or Twitter) or email to alert customers of the danger, provide advice on documenting insured property and inform customers on how to file claims once the event is over. The P&C company might also identify the location of mobile service centers.

The message this type of initiative sends to customers is unmistakable: The company is looking out for the customer and stands ready to assist during a tough time. And with modern communication technology, companies can implement a system capable of managing affordably customer outreach across multiple platforms, using automation to handle most of the workload.

Another issue is that many P&C companies don’t make a practice of asking for permission to contact customers or recording customer communication preferences. In addition to up-to-date contact information (including landline and mobile numbers), companies need to request communication preferences, such as whether the subscriber prefers to be contacted by voice, text or tweet.

Getting P&C company databases where they need to be to conduct widespread customer outreach in a personalized manner that respects customer communication preferences will take a large-scale data scrubbing effort at most companies. It can be conducted in-house if the insurer has sufficient resources to tackle such a project, or the company can choose to hire a third-party vendor.

When P&C insurers have the clean data they need, they can contact policyholders to help keep them safe, but that’s just the beginning. With clean data and the ability to automate communications using customer preferences, companies can reach out to customers about changing coverage needs, inquire about policy lapses, address late payments and much more.

The first step in fostering closer relationships with customers via personalized communication is making sure the information on hand is clean — data that has been verified as accurate. With clean data, forward-thinking insurance company leaders can ensure that consumer demand for greater personalization is met and that their company thrives in an increasingly data-driven economy.

Fascinating Patent Filing by State Farm

Sometimes other drivers can make you crazy. Maybe you’ve gestured to boneheaded motorists, safe in the anonymity of your car and the flow of traffic. Perhaps you’ve let your anger at other drivers get the best of you at times because there’s no one else in the car to judge.

But State Farm is on the case. It has developed plans to monitor your every move while you’re driving, measure your emotions, detect angry behavior and deliver stimuli such as music to calm you down.

The plans, as revealed in a patent application, would combine biometric measurements with automotive data to create a “total impairment score” that could be used to set customized car insurance rates.

“Every year, many vehicle accidents are caused by impaired vehicle operation,” State Farm says in its application, recently filed with the U.S. Patent and Trademark Office. “One common kind of impaired vehicle operation is agitated, anxious or aggressive driving.”

Are you sweating, yelling or waving your arms while you drive? State Farm’s “emotion management system” would use a variety of sensors and cameras to monitor your biometrics, including:

  • Heart rate
  • Grip pressure on the steering wheel
  • Body temperature
  • Arm movement
  • Head direction and movement
  • Vocal amplitude and pattern
  • Respiration rate

The system could use “infrared optical brain imaging data” to get deeper inside your head. State Farm might even know if you’re giving the evil eye to another driver: Measurements include gaze direction and duration, eyelid opening and blink rate.

And impaired driving is not confined to angry and aggressive drivers. State Farm also would consider nervousness, distraction and drowsiness. Other sensors would keep track of your vehicle: Are you swerving, accelerating or driving too close to other objects?

[Compare car insurance quotes through NerdWallet’s Car Insurance Comparison Tool.]

Smell this and calm down

If you are “emotionally impaired” – as measured by State Farm, not your spouse – the patent-pending system would select and deliver stimuli to change your behavior. The patent application outlines a variety of options, including relaxing music, a recorded message, sounds of nature, fragrance or a blast of cold air. The system might even suggest you stop at a coffee shop or scenic overlook.

Robert Nemerovski, a licensed clinical psychologist in the San Francisco area and an expert on anger management and road rage, was skeptical about State Farm’s patent. He questioned whether an automated system could be sophisticated enough to account for the unique characteristics of individual drivers.

“I would be concerned about individual differences: people on medication, the elderly vs. the young,” he said. “Maybe they have PTSD, or they’re in recovery from a heart attack. [State Farm] would need to know nuances of human behavior and human bodies.”

In addition, “People don’t want someone patronizing you or telling you to calm down. I’m not sure it would be successful psychologically because it would be rather annoying,” he says.

state farm patent

State Farm’s depiction of an emotional impairment score on a mobile device, from its patent application.

State Farm envisions an “emotion management system” that goes beyond just monitoring behavior. The system would store profiles for each driver so, for example, it would learn which music might reduce your hard braking or persuade you to stop tailing the car in front of you. This might spell an end to your loud music.

Each time you end a trip, the State Farm system would analyze the data and update your impairment score, which you could check on your mobile device.

Because the purpose of the patent application is only to describe the system, it leaves many unanswered questions, including:

  • How much would it cost per vehicle?
  • Who would pay?
  • How often would you have to refill your fragrance containers?

State Farm, the nation’s largest car insurance provider, declined to comment on specifics of the patent application but provided this statement to NerdWallet: “State Farm is actively innovating in a number of areas that are important to improving how we meet the needs of our customers. The patent  . . . is just one example of State Farm’s innovation. Because of the nature of our innovation work and patent program, we are unable to provide further comments at this time.”

Angry about car insurance bills, too?

According to the application, State Farm is considering applying the “comprehensive impairment level” to car insurance in several ways, including:

  • Adjusting your insurance rate, up or down.
  • Requiring you to buy a minimum amount of auto insurance, or limiting how much it will sell you.
  • Offering you a discount for using the system.
  • Flagging your policy for possible cancellation.

While State Farm’s plans may never be implemented, the carrier clearly has many ambitious ideas about monitoring customer behavior, such as its previously described ideas to price car insurance by the trip and deliver targeted ads based on where you drive.

Many consumers aren’t aware that auto insurers are preparing to unleash a tsunami of such services based on telematics, systems that track your car and driving habits. Progressive was the first to enter the space and dominated it for a while with its Snapshot usage-based insurance program.

“Other big auto insurers don’t want to be in second or third place again,” says Donald Light, director of North America property/casualty insurance for Celent, a research and consulting firm that focuses on information technology in financial services.

“I believe in about five years it will be a standard part of an auto insurance policy,” Light says.  “Insurers will say, ‘If you don’t want to use it that’s fine, too, but we’ll charge you based on not having it.’”

Light sees one large hurdle to State Farm’s emotion-management plan: The company will have to convince state insurance regulators that the emotional impairment scores accurately reflect risk.

“The key qualifier is that these kinds of data have to make actuarial significant difference in the ‘risk’ of different drivers,” Light says. For example, if State Farm wants to charge more based on driver agitation, the company will have to prove that agitation causes crashes.

Nemerovski says State Farm’s emotional management system might appeal to millennials, who are comfortable with the idea of measuring physical and other metrics so they can be improved.

“But I don’t think people would want it to be shoved down their throats,” he says.

The Future of Life Insurance

In its most recent report, “Tomorrow’s World; the Future of Aging in the U.K.,” the International Longevity Centre, a think tank focused on longevity, population and aging, painted a gloomy picture. The report says:

  • That the social care system is crumbling, and social class will heavily affect the life experience of the aged.
  • That housing and planning are inadequate to meet the needs of an aging population.
  • That individuals are underestimating their life expectancy and are likely to run out of money in old age.
  • That older people will suffer (and perhaps die) of different things: Where once the issue was heart and respiratory diseases, now it is likely to be illnesses of non-communication such as dementia.

It’s a worrying vision – one that perhaps is replicated in many other countries. The report recommends a bold 10-point action plan. It says:

1. Health must find a way to be more responsive and preventative.
2. Government must make progress in delivering a long-term settlement to pay for social care.
3. Savings levels for working age adults must increase.
4. The average age of exit from the workforce should rise.
5. The number and type of homes built should be increasingly appropriate for our aging society.
6. Government should make progress in facilitating greater risk sharing in accumulation of retirement income.
7. There is a need for a more informed older consumer.
8. Our aspirations for retirement must be about much more than us spending more hours watching television.
9. Businesses should better respond to aging.
10. The social contract needs to be strengthened between young and old.

Doesn’t the life and pension insurance industry have a part to play in almost all of this road map? Is there any reason why the industry should sit on the sidelines?

Here are five issues for the industry:

  • Insurers need to continue the shift from being reactive to being proactive – and must share the benefits with policyholders. Stakeholder buy-in through effective communication and enlightenment is critical – and it is increasingly becoming urgent.
  • Can insurers – on behalf of their policyholders, who are inevitably with them often for decades – influence issues related to home building and planning? I wonder how I would react if I really thought that my life and pension insurer was representing my interest to a point that it was lobbying about this type of stuff on my behalf?
  • The need for cooperation between the private and public sectors reinforces the need for empathy by both government and private insurers toward each other, perhaps with tacit agreement that they (we) are all in this together.
  • As the average age of workers increases, and some seek an alternative to watching TV or just trying to make ends meet, I wonder whether there is propensity for more workplace accidents. Isn’t there an employers liability/workers’ compensation angle to consider?
  • And, of course, how do we make life and pension insurance attractive to those starting their work life? Doesn’t the industry really need to make insurance both more relevant and fashionable?

Don’t insurers need to communicate better, engage differently, think more about the changing demographic footprint and generally step up the pace? All the innovation seems to be going into P & C insurance, but we can’t allow that to suck the energy from life and pension.

After all, having a “connected bedpan” as part of the Internet of Things might be useful for some – but don’t we need to be bolder than that in our thinking?

trends

InsurTech Trends to Watch For in 2016

The excitement around technology’s potential to transform the insurance industry has grown to a fever pitch, as 2015 saw investors deploy more than $2.6 billion globally to insurance tech startups. I compiled six trends to look out for in 2016 in the insurance tech space.

The continued rise of insurance corporate venture arms

2015 saw the launch of corporate venture arms by insurers including AXA, MunichRe/Hartford Steam Boiler, Aviva and Transamerica. Aviva, for example, said it intends to commit nearly £20 million per year over the next five years to private tech investments. Not only do we expect the current crop of corporate VCs in the insurance industry to become more active, we also expect to see new active corporate VCs in the space as more insurance firms move from smaller-scale efforts — such as innovation labs, hackathons and accelerator partnerships — to formal venture investing arms.

Majority of insurance tech dealflow in U.S. moves beyond health coverage

Insurance tech funding soared in 2015 on the back of Q2’15 mega-rounds to online benefits software and health insurance brokerage Zenefits as well as online P&C insurance seller Zhong An. More importantly, year-over-year deal activity in the growing insurance tech space increased 45% and hit a multi-year quarterly high in Q4’15, which saw an average of 11 insurance tech startup financings per month.

In each of the past three years, more than half of all U.S.-based deal activity in the insurance tech space has gone to health insurance start-ups. However, 2015 saw non-health insurance tech start-ups nearly reach parity in terms of U.S. deal activity (49% to 51%). As early-stage U.S. investments move beyond health coverage to other lines including commercial, P&C and life (recent deals here include Lemonade, PolicyGenius, Ladder and Embroker), 2016 could see an about-face in U.S. deal share, with health deals in the minority.

Investments to just-in-time insurance start-ups grow

The on-demand economy has connected mobile users to services including food delivery, roadside assistance, laundry and house calls with the click of a button. While not new, the unbundling of an insurance policy into financial protection for specific risks, just-in-time delivery of coverage or micro-duration insurance has already attracted venture investments to mobile-first start-ups including Sure, Trov and Cuvva. Whether or not consumers ultimately want the engagement or interfaces these apps offer, the host of start-ups working in just-in-time insurance means one area is primed for investment growth in the insurance tech space.

Will insurers get serious about blockchain investments?

Thus far, insurance firms have largely pursued exploratory investments in blockchain and bitcoin startups. New York Life and Transamerica Ventures participated in a strategic investment with Digital Currency Group, gaining the ability to monitor the space through DCG’s portfolio of blockchain investments. More recently, Allianz France accepted Everledger, which uses blockchain as a diamond verification registry, into its latest accelerator class. As more insurers test blockchain technologies for possible applications, it will be interesting to monitor whether more insurance firms join the growing list of financial services giants investing in blockchain startups.

Fintech start-ups adding insurance applications

In an interview with Business Insider, SoFi CEO Mike Cagney said he believes there’s a lot more room for its origination platform to grow, adding,

“We’re looking at the entire landscape of financial services, like life insurance, for example.”

A day later, an article on European neobank Number26, which is backed by Peter Thiel’s Valar Ventures, mentioned the company would like to act as a fintech hub integrating other financial products, including insurance, into its app. We should expect to see more existing fintech start-ups in non-insurance verticals not only talk publicly but also execute strategic moves into insurance.

More cross-border blurring of insurance tech start-ups

Knip, a Swiss-based mobile insurance app backed by U.S. investors including QED and Route66, is currently hiring for U.S. expansion. Meanwhile, U.S. start-ups such as Trov are partnering and launching with insurers abroad. We can expect more start-ups in the U.S. to look abroad both for strategic investment and partnerships, and for insurance tech start-ups with traction internationally to expand to the U.S.

Top 10 Insurance Trends in 2016

Though the U.S. insurance industry is entering 2016 well-capitalized and profitable, too much capital capacity does not bode well for pricing as new capital flows in, seeking opportunities and driving pricing competition. Against this backdrop, insurers will be juggling priorities: modernizing their core systems, maintaining profitability within existing portfolios, accelerating their digital transformation and cultivating new products and services.

info


Download the full summary here.