Tag Archives: connected home

Autonomous Car Tech Reaches Mid-Market

As part of the 2016 edition of the Usage Based Insurance study, we analyzed the impact of autonomy on the insurance market. We forecast that 380 million semi-, highly or fully autonomous vehicles will be on the road by 2030.

This might sound like a lot, but then at the Consumer Electronics Show in Las Vegas we heard that new manufacturers are entering the race. Typically, we expect the luxury brands to foster the development of autonomous vehicles (AVs), with Mercedes, BMW and Tesla all topping the list of development activity. This time, however, it is the mid-market brands such as Nissan, Ford and GM that are making the announcements.

All three arrived at the show with news and partnerships up their sleeves as the competition grows ever more intense.

  • Nissan, in partnership with Renault, announced 10 vehicle models with autonomous capabilities on the road by 2020, with single-lane control from this year and rolling out multi-lane control intersections assistance from 2018 onward.
  • GM announced a $500 million investment in Uber rival Lyft, which GM says could lead to the development of a fleet of driverless cars, some available for hire, as well as a network of car rental stations. This announcement follows news regarding the development of GM’s self-driving version of the hybrid Chevrolet Volt.
  • Ford revealed an agreement with Amazon, aimed at linking cars with connected homes and the Internet of Things. Ford was also expected to announce a tie-up with Google, but that did not happen, possibly because of recent regulatory proposals limiting driverless vehicle testing in California. Instead, the car maker stated that it would triple the size of its Fusion Hybrid autonomous research fleet this year to 30. Ford will also integrate new solid-state lidar sensors that create real-time 3D models of the surrounding environment.

Although many autonomous functions, such as cruise and parking, are aimed at improving comfort, most of the development today is focused on safety and crash avoidance.

These capabilities will have a direct impact on the insurance industry a lot sooner than the driverless car. We analyzed and quantified that impact in the study to precisely estimate the share of accidents that could be avoided with the introduction of advanced driver assistance systems (ADAS).

For example, we concluded that frontal collision avoidance and cruise systems could reduce losses by as much as 50% (depending on the level of sophistication).

ADAS functions could therefore lead to a reduction in accidents of between 30% and 40%, with AVs beginning to have a significant impact in mature markets from 2023 onward. In the most advanced countries, such as Germany, premiums will decrease by as much as 40% between 2020 and 2030.

With the end of the statistical actuarial model also approaching, insurers will need to be acutely aware of the car technology evolution speed. The car without accident will be on the road long before the car without driver.

The 2016 edition of the UBI Global Study was launched last month; It covers the impact of ADAS on insurance premiums in details and with a market forecast up to 2030. You can download the free abstract here.

Will Fintech Disrupt Health, Home Firms?

The integration of technology in the insurance company’s value proposition is turning out to be one of the main evolutionary trends in the sector, and digital initiatives have been for a couple of years now one of the priorities of insurance groups. Until today, though, they have brought only limited improvement when it comes to the competitive abilities of the insurer.

The best practices at the international level show that, to obtain concrete benefits, the innovation has to be directed toward clearly determined strategic objectives.

An interesting example is the American company Oscar – a start-up that in less than two years has managed to raise more than $300 million at a valuation of more than $1.5 billion. It has radically innovated the customer experience of individual health insurance policies by directing the innovation effort toward two key factors that are crucial for the profitability of the medical spending reimbursement business: deductibles and “emergency” visits.

Oscar has created an insurance value proposition based on a smartphone app that incorporates a highly advanced search engine – including a search based on symptoms – allowing the insured to identify and compare the medical structures part of the preferred network. In this way, the client receives support in optimizing direct spending before reaching the deductible; this basically postpones when the insurance company starts to pay and thus reduces the amount of spending (medical reimbursements) by the insurer for the remainder of the year.

The company addresses emergency visits by providing chat with a specialist and a call-back system that the insured can choose at will from inside the network. This represents a comfortable alternative and reduces the number of urgent visits.

Health insurance and connected health

In these last months, I have been considering how to replicate the motor telematics experience for the health insurance sector. Insurance companies see the benefits from a telematics black box and how the return on investment in this type of technology can be maximized by the insurer: This is possible by taking into consideration not only the underwriting of the car insurance policy but by also looking at the services provided to the client, at loss control and at customer loyalty. In health insurance, similar benefits are achievable by using mHealth devices and wearables.

The first element is risk selection, seen in car insurance as:

  • the capacity of auto selection and dissuasion of risky behavior,
  • the integration of static variables traditionally used for pricing with a set of “telematics data” gathered within a limited time and used exclusively for supporting the underwriting phase.

The creation of a value proposition that is focused on the use of wearables and that uses “gamification” makes the product attractive to individuals who are younger and healthier – generating a self-selection effect comparable to the motor telematics experiences. Oscar, since the beginning of January, has been offering clients a pedometer connected to a mobile app. Every day, the app shows a personalized objective that, if attained, means $1 earned by the customer. Each month, the customer can receive a maximum of $20 as cash back from the company.

The second source of value generation is services. The use of telematics data represents an incredible opportunity for offering new health services and for offering a better customer experience: for example, the geolocation of medical structures and doctors who are part of the network, linked to a medical reimbursement policy.

Medibank, of Australia, has integrated in its health policy (using a smartphone app) a series of services built on informative contents and advice. The services are medical – as done by the Italian insurance fund Fondo Assistenza Benessere, using an app called Consiglio dal Medico (an Italian start-up partnering also with Uber) – as well as related to wellness. Medibank, using this package of services, produced 10% growth in the company’s top line. This Australian player has created an app for noncustomers that gives access to wellness discounts and attracts customers who can later be offered other insurance, too.

The ability to provide health services with a high perceived value (from the client’s point of view) can also allow the company to increase the efficiency of guidance inside the preferred network – this is a crucial aspect for controlling the loss ratio of a medical reimbursement product. The loss control actually represents the third area of value creation, just as it does for the auto business.

Within the health industry, it will soon be possible to generate significant economical benefits employing telemedicine to optimize spending with medical reimbursements or to link the reimbursement to the actual observance of the client’s medical prescriptions. In the medium to long term, the objective is to have behavioral and contextual data to prevent fraud and early warning systems that can spot altered health conditions and that allow preventive and timely intervention.

South African-based Discovery has successfully tried out this second approach. It reduced the loss ratio of the cluster of insured who suffer from diabetes – mainly reimbursements linked to complications because of lack of self-control. Discovery provides an instrument for measuring the blood sugar level through a connected app and rewards the insured.

Discovery’s Vitality program represents the international best practice regarding the fourth axis of value creation: behavior guidance, by using a loyalty-based system that rewards non-risky behavior. The South African company has integrated – in its very complex reward system – devices for measuring physical activity and has incorporated their usage among the “rewarded” types of behavior. Discovery’s experience in several different countries proves the effectiveness of this approach in terms of:

  • commercial appeal
  • capacity to acquire less risky clients
  • ability to gradually reduce the risk profile of the single client.

Pricing based on individual risk is the last benefit achievable with the integration of wearables and health insurance policies. Constant monitoring of the level of exposure to risk lets the insurer create tariffs based on the health state, lifestyle and context of a person. As already done in the auto telematics business, this will be a goal to be attained after some years of data gathering and systematic analysis of the historical series together with information regarding medical reimbursements.

Home insurance and connected home

Homes are another area in which, at an international level, there has been experimentation with how to integrate an insurance policy with actual sensors. There already exists a replication of the business model used more than 10 years ago in the auto insurance sector — an up-front discount between 10% and 25% of the insurance premium based on installation of a device at the client’s house and by the payment of a fee for services or a lease for the technology. This approach, which has been adopted in the U.S. by State Farm, Liberty Mutual and USAA and in Italy by IntesaSanpaolo Assicura, BNP Paribas Cardif, Groupama e Poste, is based on two of the five levers of value creation: first, loss control – focused on flooding, fire and theft – and second, value-added services. American companies have even reached the point where they offer clients a wide range of services provided by selected partners (such as Nest) and tied to the home “ecosystem,” which can even include medical assistance services.

An interesting and innovative example of the use of such technology for the assessment and risk selection in home insurance is the one adopted by Suncorp with a retail touch to it, and by ACE Group, which focuses more on the insurance needs of high net worth individuals (HNWIs). Both companies have used a partnership with a start-up called Trōv – a smartphone app that allows registering and organizing the information referring to personal objects, including through photos and receipts – to evolve their underwriting approach when it comes to the risk connected to the contents of the house.

Domotics, or home automation, is growing at a high rate even in Italy and represents a material part of the revenues generated by the Internet of Things, according to data provided by the Osservatorio of the Politecnico di Milano. A horizontal domotics solution – with thermostats, smoke and water detectors, sensors present in appliances and other household items, sensors at the entrance and antitheft alarms, sensors spread within the building – would let an insurance company track the quantity and level of exposure to risk. This includes, for example, the periods and ways in which the home is used but also the state of the household and the external conditions to which it is exposed (humidity, mechanical vibrations, etc.).

The insurer could price based on individual risk, adopting pricing logic based on behavior, as already done in the motor sector. This could open up growth opportunities, such as for secondary houses used only for vacation and rarely insured. This scenario, which sees the growth of solutions built on connected objects within the home – if correctly approached by insurers by reviewing their processes to make the most of the potential offered by gathered data – can lead to important benefits in loss control: Some studies have estimated that there is the potential to cut in half the current expenses for claims.

To turn this opportunity into reality, it is essential that the insurer acquire the ability to connect its processes (through adequate interfaces) with the different connected objects. Insurers must create an open digital platform that uses the multiple sensors to be found in the home “ecosystem” – just like those used in the health sector.

The change of paradigm doesn’t only concern fundamental aspects of the technological architecture – like data gathering or standardization of data coming from heterogeneous sources – but affects the strategic choices of the business model. For insurers, it becomes a necessity to define their level of ambition for their role in the ecosystem and for their cooperation with other players to create solutions and services around an integrated set of client’s needs.

It is extremely interesting to see the journey made by American Family Insurance, which – in partnership with Microsoft – has launched a start-up accelerator focused on home automation.

Insurers have to start thinking strategically around how adapt insurance business to IoT, before some new Fintech comers do it.

This article originally appeared in the Insurance Daily n. 749 and n. 750 Editions.

The Insurance Agent of the Future?

Recently, my 80-something mother bought an iPad to replace one of the first models, which is now obsolete (can’t upgrade the iOS!). So, though she is an always-with-some-trepidation user, she’s no Luddite. After her second day with the new device, she called me with some alarm to say that someone named Siri was trying to hack into her iPad (for you non-iOS users, Siri is the name of the iOS speech recognition software – a new feature for my mom).

This got me thinking about big data and the role of the insurance agent in the future. My thinking goes something like this…

Insurance Agent of the Future

Insurance of the future will be beyond indemnification for losses (at an actuarially fair price, of course) and will include loss reduction in some way, whether through direct action or indirect advice.

Let’s think about home automation and monitoring systems, a.k.a., the connected home, or “telematics for the home,” delivered through companies such as Keen, SNUPI and Revolv. Think thermostats, video cams, carbon monoxide and fire/smoke detectors, storm shutter and roof single sensors, refrigerator and freezer sensors, door lock sensors, etc. The capabilities are going to be integrated and will involve big (data).

Some company – maybe insurance companies, maybe those giant B2C companies like Google and Amazon, maybe some others – will take all that data and present it back to the consumer in an intelligent manner. Here is where loss reduction becomes very interesting. Companies could take direct action through automated activation of alarms and shutdown of systems when storms are approaching. Indirect advice might mean notifying a homeowner of unlocked doors, foot traffic in the house and refrigerator doors opening and closing.

Where does the agent come in? Maybe Google or Amazon and ADT will just get this all to simply work: Download the app, and it tells you what to do. But maybe the consumer will want some help with all this data and all this activity: what filters to tighten, what sensors to de-activate and what data is needed to get the right coverage at the right price.

Maybe the Geek Squad needs to morph to the Home Monitoring Squad. And the Home Monitoring Squad sure sounds like the possible insurance agent of the future – tech-savvy, risk-savvy and comfortable conversing with 80-year-olds.