Tag Archives: digitization

Insurance and IoT: The Perfect Match

The modern insurance industry isn’t just about processing damage claims—it’s about helping clients avoid them altogether. The Internet of Things (IoT) is reshaping the way insurance companies operate, with huge possibilities for the future, arming insurers with a smarter set of tools to better serve their customers.

In this article, I’ll diving into a few cutting-edge examples of IoT in action within an insurance organization and where I see the industry going.

Usage-based and parametric insurance

Usage-based insurance is already benefiting from the IoT by helping insurtechs offer more accurate and individualized policies based on customers’ behavior and use of the insured object. In the motor industry, Discovery Insure’s innovative Vitality Drive sensor is an example of such use-based insurance. With an integrated, low-power, non-intrusive wireless device attached to the windscreen, connected to a mobile phone app and able to transmit core driving metrics, Vitality Drive tracks driving behavior and allows Discovery Insure to offer incentives and rewards for better driving.

Unsurprisingly, the system has detected a strong correlation between better driving habits and fewer accidents and less severe insurance claims. By encouraging better driving by aligning insurance premiums with the lower probability of accident claims, this type of use-based insurance helps both insurer and customer and improves road safety in general.

Parametric insurance is described by the Center for Insurance Policy and Research as “a type of insurance contract that insures a policyholder against the occurrence of a specific event by paying a set amount based on the magnitude of the event, as opposed to the magnitude of losses in a traditional indemnity policy.” In other words, a parametric insurance policy insures against an event, rather than against loss or damage of assets. This helps to bypass – or at least greatly simplify – the process of calculating potential losses and making policy adjustments after a claim; meaning that parametric insurance claims are processed and compensated much faster than indemnity claims.

The advent and growth of parametric insurance has close links to the IoT, with more sophisticated devices and better connectivity allowing providers to both calculate and compensate more effectively. This is especially true in the case of natural disasters, which have long been notoriously tricky for insurers.

Wakam (former La Parisienne Assurances), another insurtech, makes full use of the IoT to improve customization and automation. Both tailoring parametric policies to their customers’ needs and automating the claims process benefit from the capabilities of these smart devices. Wakam has gone further and has introduced a private blockchain platform to process and manage parametric claims. The combination of IoT and blockchain technology allows parametric policies to be generated and managed intelligently, based on global, connected event data, rather than isolated public or private events.

See also: Despite COVID, Tech Investment Continues

Avoid damage claims with IoT

Today’s insurance industry isn’t just about processing damage claims. It’s about helping clients avoid them altogether. Insurers can use the power of data to create a more secure, connected world. The next generation of IoT-based smart security solutions overcomes the shortfalls of earlier technology to provide connectivity at a cost-efficient price.

The potential of modern IoT is almost limitless: protect homes and businesses with security alarms that aren’t susceptible to jamming; recover stolen vehicles with powerful, reliable tracking systems; and react quickly to emergencies in the home or business with connected smoke detectors and real-time water leak detection. The overlap with insurance is obvious – IoT data provides a smarter set of tools for the modern insurance landscape.

Discovery Insure, for example, uses IoT to tackle a major problem in South Africa, where 48,306 vehicles were stolen in 2019. Only one in five stolen vehicles were recovered. The process was usually slow enough that thieves had time to dismantle stolen cars or ship them to the other side of the world. Even if the car was found, insurers might refuse to compensate the victim if there was no physical evidence of a break-in. But IoT sensors allow cars to be found even when they are hidden in enclosed or underground locations.

The future of IoT in insurance

From 2019 to 2024, the IoT insurance market is expected to grow 60%. The number of use cases for IoT devices within insurance will grow along with it, with more electronic devices entering the consumer and business marketplaces year on year. Traditional insurers are looking to the future and working on digitizing their offerings to move forward faster and with greater agility. According to the Global Insurtech Market report published in 2020, the pandemic has accelerated the digital transformation of industry, a driving force in the commercial introduction of IoT. Thanks to this IoT, insurance companies are being given more opportunities to revolutionize and grow than ever – but taking advantage of them will require forward thinking and adaptability.

Let’s Do More Than Create Faster Horses

Six years ago to the day, as I write this, I was a keynote speaker at a TINtech London Market conference with a brief to talk about e-trading and technology that asked: What are the new technologies that will affect people and process and stimulate innovation? Why is now the time to invest? What are the challenges to overcome? 

I start with this because it resonates strongly with what the InsTech London E-trading platforms challenges, opportunities, and imperative” paper now sets out to address, several years later.  

Delve deeper, however, as this paper does, and you see that, while progress has not been made as swiftly in our sector as it has in others, the encouraging reality is that a lot has, in fact, changed and even more seems to be about to change in what the paper describes as a “truly digital world that many of the consumers and businesses we serve are already inhabiting.”

The paper is, of course, a must read. For those with less time, you can head straight to the conclusions. Those who prefer edification with their morning coffee and sit back and listen to the excellent podcast with Robin Merttens and Mark Geoghegan. As a poor fourth, here is my brief summary of highlights:

  • The environment is more fertile today than ever before. “COVID-19 has acted as an accelerant of digital adoption and provided momentum for the adoption of e-trading, a belated burning platform,” and is smashing some long-held paradigms, not least about shoe leather and queues. “There is more recognition of the imperative for change; greater desire from within to deliver it.”
  • There needs to be an intermediate stage between digitizing what the market has today (slips, quotes) to help drive adoption, and then evolve to become a truly digital ecosystem. The intermediate phase will be the foundation to push on from. The digital evangelists in our market are crucial, but it is naïve for us all to think we can step straight into a full-on digital ecosystem. Electronic case files (ECF) eliminated the claims paper but did not fundamentally change the process. ECF opened the servicing bandwidth — previously, the speed of client service was directly attributable to the length of a claims broker’s arms! ECF gave the opportunity to make a significant change from old state, but it was an example of digitizing an existing process and not reimagining it in a digital landscape. Perhaps a case of “digital lipstick on a legacy pig,” to quote Robin.
  • Straight-through processing is still something of a dream, and much data remains sub-optimal. The data standards are too narrow, and more open-source standards must come to the fore. Connectivity is a big issue. Application programming interface (API) adoption will gather momentum once the building blocks are in place. There is “much work to be done to achieve the levels of system-to-system connectivity we need. The industry is well short of where it needs to be on defining data and process standards and on pooling the required knowledge and resources to define them.”
  • The stage is set for more innovative digital solutions to emerge. It is about being brave, and “the market cannot be a closed club if it is to succeed with connectivity.”
  • The big brokers’ influence is key – “the king makers.” The fear of disintermediation is nowadays overblown, but, with a traditional model of “customers to the left and markets to the right,” there is still a fundamental barrier. That is unsustainable and cannot be a continuing strategy, which is something more and more brokers now recognize. It is in and around data, analytics and insight where they can add real value far beyond the transaction. Algorithms will take over. They must, not least because customers like them. “If we fail this time round the most likely cause will be that the brokers sought to protect the status quo for a decade longer.”  
  • If the big brokers decide to push on, it will happen, and Lloyd’s has a huge role to play, too. Blueprint Two sets up an environment where “private enterprise can be the way forward for the market to adopt, and across multiple platforms.”
  • Consensus is a better way forward (the carrot) rather than imposition (the stick), but at some point compulsion must come. “A long-term free-for-all is unsustainable, and there will, as with any space race, be winners and losers over the medium term.”
  • The customer’s voice in ‘the future of insurance’ is not loud enough. The market needs to be bringing the customer inside the tent constantly. If we just concentrate on making life easier for brokers and underwriters, customers will build the solutions that suit their needs independently of us. A great example is Insurwave, the genesis for which was the growing frustration from AP Moller Maersk about the inefficient handling of its huge cargo account. The endgame of a genuine ecosystem involves all market participants, which must include customers. “Our customers are increasingly strident in demanding it.”
  • Traction has always been missing, but credible leadership is now starting to show up.
  • RIP, analog! “The influence of the analog era workforce is waning, and, as a result, the cultural barriers to adoption are declining.”
  • My personal plea: Allow the innovators and the technology specialists to now lead us forward. In doing this, we must not forget the other key members of the cast. In the past, we were hindered by a fundamental lack of actual brokers and underwriters being involved. Those that trade, brokers that broke and underwriters that underwrite. Gather the requirements at a trading floor level with active engagement from that community feeding directly into the innovators and technology partners. This is not to build consensus, but rather to be sure to surface the key issues and pain points that communities need technology to solve for. Imagine organizing a music festival without any reference to the bands headlining and their needs. Or designing a restaurant without involving the chef.  

See also: 4 Post-COVID-19 Trends for Insurers

In conclusion: We are in the risk business, yet we have been risk-averse. Let us take some risks now or, as Henry Ford would have it, we will forever just create faster horses. Or in our world, perhaps we will just end up with smarter slips. “Now we need to harness this collective will to get it done and take great care that we don’t jeopardize this historic level of enthusiasm,” and “we can’t build our future in an isolated echo chamber. It is a prerequisite that we understand what is going on in other industries and align our technology, products, and services with their requirements and interests.” Now really is the right time, and, to borrow from Macbeth, “if it were done, when ’tis done, then ’twere well it were done quickly.”

Digital Future of Insurance Emerges

I regularly communicate with a very large and diverse cross-section of the broad insurance ecosystem. and almost everyone expresses the same professional anxieties and frustrations. With regard to the business of insurance, very few have a clear view of the future, and for obvious and good reasons. However, I believe that several discernible patterns are emerging out of the fog of this pandemic and together they provide a fairly well-defined view of the future of insurance, leaving only the timing uncertain.

Digital Evolution

It’s a good bet that you are reading this article on digital media and that it was published in digital format. As overused and abused the word “digital” may be, it is mission-critical to every aspect of our industry. And, although the migration from analog to digital was already well underway in 2019, the arrival of COVID-19 acted like gasoline on a fire and accelerated the trend. Data by its very nature demands to be digitized to be useful, and no industry has more data than insurance. Technologies such as mobility, connectivity, imaging and artificial intelligence in all of its manifestations are useless in an analog environment. Paper is the enemy of efficiency, information and cost management.  

Claims Is a Major Beneficiary of Digital

No single area of insurance has benefited more than claims from the digital revolution. The “claim is the moment of truth” mantra is tiresome but truer than ever. As insurance fell victim to commoditization, and as advertising budgets became bloated, insurers turned to claim service to differentiate and promote their brands. But true claims excellence is only attainable through end-to-end claims process digitization. From first notice of loss automatically transmitted by connected sensors and devices all the way to claim payments made instantly and digitally, and for every step in between, digital solutions are being adopted and integrated into digital claims platforms at breakneck speed.

Digitization and Innovation 

If, as it often said, “data is the new oil,” then digitization is the refinery, storage facility, pipeline and the distribution network. Innovation essentially means connecting the dots, particularly the ones that others have missed and those that were previously unconnectable. Digitization enables the connection of “dots” – individual bits of information from myriad sources all strung together in an electronic chain to arrive at a critical outcome. That could be an insurance quote, an estimate of repair costs, the identification of a likely fraud and thousands of others, all of which are required to make, build, operate and maintain an insurance enterprise and partner ecosystem. And digital, next-generation technologies enhance an insurers’ ability to easily build a partner ecosystem, embed insurance offerings and enable an innovation culture.

See also: For Agents, COVID Means Digital or Bust

Digitization has enabled mobility and connected vehicle telematics, which in turn has spawned exciting cross-industry partnership products and services linking auto makers, insurers, information and service providers as well as drivers. The resulting rewards and benefits include hyper-personalized auto insurance products, services and rates for drivers, deeper engagement with vehicle owners and greater certainty of safe and proper accident repairs for OEMs, faster and better claims service for insurers and safer roadways for all of us.  

Similarly, digitization has enabled property insurers to develop and market new risk avoidance and claims services for connected homes, factories and businesses. Life, health and accident insurers are leveraging wearables and telehealth to drive meaningful customer engagement and potentially significant new revenue. 

Digital Communications and Customer Experience

A new universe of digital messaging platforms, chatbots, business texting, voice assistants and more has emerged and is in widespread and general use in commerce today, and the insurance industry has taken notice and is quickly playing catch-up. During a recent virtual insurance industry event, a SMA (Strategy Meets Action) survey of participating insurers asked about their interest in and objectives for digital communications and found that 83% consider it a vital part of the overall digital transformation strategy; 75% expect digital communications will help to improve the customer experience (CX). And who among us is not routinely conducting business through videocast – the ultimate digital/human interface? 

Accenture says that “CX is the new battleground for brands.” 72% of businesses say improving customer experience is their top priority, according to Forrester. And no wonder – Forrester found that each single point increase in CX can translate into tens of millions to hundreds of millions in annual revenue.  

In its “Digital Transformation: Powering the Great Reset” of July 2020, the World Economic Forum (WEF) states that as the world moves even more online due to the coronavirus pandemic – which has driven a 50% to 70% increase in global internet usage – the ability to serve customers on the digital channels they choose is no longer an option, creating what the WEF calls a “watershed moment for the digital transformation of business.”

Digital Disruption

The insurance industry has been a laggard in digital transformation, yet a new class of venture-backed startups has disrupted and refocused incumbents and exploited their weaknesses by leveraging new digital technologies. 

Specific legacy vulnerabilities and areas of opportunity for these well-funded startups have included new cyber risk and gig economy protection products, underwriting, administration and claims management. 

Applying many types of artificial intelligence (AI), including machine learning (ML), natural language processing (NLP) and imaging technology to fraud prevention addresses one of the industry’s most enduring pain points. 

Another intensely painful area is the claims process, which has long been a protracted, labor-intensive, inefficient and costly process and has hurt customer satisfaction, loyalty and retention. New technology offerings have come to market that streamline and compress the end-to-end claims process using AI and digital imaging to augment damage appraisals, track and report repair status, automate disbursements to policyholders and vendors and better engage with policyholders. 

See also: New Digital Communications

Insurance claim payments have always been slow and complicated, involving multiple parties such as other insurers, attorneys, healthcare providers, auto and property repairers and contractors. New digital claims payments systems have come to market to solve those challenges, and the rush to touchless and virtual claims processes, boosted by pandemic-driven consumer preferences for safer contactless transactions, is driving adoption of these systems.

None of these advances would have been possible without digitization. The future of insurance is starting to come into focus, and it is filled with exciting new digitally enabled opportunities for everyone involved.  

This theme will be explored in depth with industry CEOs and C-level speakers during The Future of Insurance USA from Reuters Insurance Events online, Nov. 16–18, 2020.

New Sense of Urgency on Going Digital

If necessity is the mother of invention, the insurance industry can proudly say that, in the face of COVID-19, necessity also became the mother of innovation. 

Kudos to the Insurance Industry

From repositioning hundreds of thousands of employees from offices to a fully effective remote work-from-home format in less than a month to quickly implementing technologies enabling them to continue to offer products, services and support, barely missing a beat, the industry rose to the challenge.

These accomplishments did not just happen. It took decisive leadership, starting in the C-suites of the industry, and focused, well-articulated action plans that flowed down into middle management and out to the front lines.  It also took increased investment, some of which was unexpected and unbudgeted. Marshaling the capital required a compelling justification, and in business there is no more convincing target than results and outcomes, which are measured by a variety of metrics beyond just financial results, including customer experience and satisfaction, retention, market share growth, reputation management, credibility and competitive strength. 

More Work to Do

But this transformation is far from over and will no doubt continue long after the pandemic recedes. There is a sense of urgency not evident prior to March 2020. Events over the past few months have forced C-suite leaders to realize that their digital transformation efforts need to be expanded and accelerated to light speed. It is now broadly accepted that a comprehensive digital strategy and implementation plan is critical to carriers that are serious about becoming digital insurers. 

Immediate, Enterprise-Wide Digitization Now Job #1  

Unfortunately, not all carriers will succeed in this journey. The survivors will be innovative, nimble and fiercely customer-centric. They will be committed to enterprise-wide conversion to digitization. Investments in mission-critical technology will need to be prioritized. Speed to market will be mandatory. The hallmarks of successful carriers will include leveraging high-powered transformational technologies, including IoT, telematics, sensors and more. These same market leaders will learn to find and engage with traditionally unreachable customers and convert them into their brand ambassadors. And these leaders will adopt digital technology as a strategic priority and achieve automation efficiency by arming their companies with the very latest in client communications, finance processes, digital and touchless claims processes and digital marketing.

See also: COVID-19: Technology, Investment, Innovation

According to Reuters Events’ Connected Insurance 2020 Report, in 2019, 63% of insurance carriers rated the development of new digital products and services as a key expected outcome over the next 12 months. In a post-pandemic world, it is likely that figure will be nearer 100%.

We need to take every opportunity to listen and learn from our industry leaders, who understand what it takes to survive this challenging period and emerge even stronger.

This theme will be explored in depth in the Reuters Events webinar titled “CNA, Nationwide and Quadient: A C-Suite Take on Results Driven Technology” on Sept. 3, 2020. Register here. This webinar is being run in conjunction with The Future of Insurance USA 2020, which takes place online Nov. 16–18.

What Digital Can Do for Disability Claims

Healthcare is being transformed by advances in artificial intelligence, virtual reality, machine learning, sensors and other innovative technologies. Practically everybody has a smartphone, making it easier than ever to gather data and consent to third-party access. Unique data insights mean providers can offer people products and services tailored to them individually.

For insurers, digital technology offers new ways to manage risk that relies less on face-to-face and traditional clinical assessment; this is why there is so much interest in understanding how innovation might work. Selected comments from four key players in the digital health ecosystem make clear the appeal of putting two and two together.

Thomas Lethenborg at Monsenso, a mobile platform for mental health, said, “Digital technology helps an individual move from reactive behavior to being more proactive – and this changes the paradigm in particular with engagement.”

It’s a view shared by David Forster of Thrive, a digital interventions app for mental health: “Data drives our understanding of what works best for the individual.” According to Forster, the success of digital technology in clinical settings points to real opportunities in insurance: “It makes it possible to provide policyholders help with illness prevention, early detection and assistance on a personal level.”

Ian Prangley, of exercise rehabilitation service TrackActive, continued the theme when he said, “For insurers, digital solutions can drive connectedness, engagement and customer satisfaction while enabling people to self-manage their health. Harnessing data insights and implementing artificial intelligence (AI) is key to achieving this.”

See also: Why to Digitize Disability Claims  

A comment by Danny Dressler of AIMO, an ecosystem integrating intelligent motion analysis into musculoskeletal care, added further confirmation: “As more and better data is gathered and processed safely, AI offers the most promise to take care of people’s health, and fix issues in both healthcare and the life and health insurance sectors.”

By using digital means, insurers can create scalable, automated, speedy ways of supporting people when they need help the most. Proponents argue it offers better health outcomes for policyholders that will reduce the costs associated with long disability claims – a win-win for both insurers and consumers.

Dressler also said that “technology like ours lets insurers offer customers new solutions such as dynamic pricing and automated claims and even help to prevent claims from happening.” Lethenborg says it represents “an opportunity to ensure the data collected gives holistic insights and analytics that we can use to intervene more rapidly, when help is needed.”

But it’s crucial the highest levels of privacy and data protection are guaranteed and operators are in full compliance with regulations. An imperfect balance of privacy with innovation is a deal-breaker for consumers.

Forster is clear how delicate this balance is: “We recognize our responsibility to safeguard users’ data, but at the same time information technology empowers people to make choices and participate actively in managing their own health – it puts them in the driving seat for the first time.”

For digital solutions to be convincing, research and scientific evidence are needed, but with newly made services, long-term experience is scarce, and a leap of faith is required.

Dressler spoke for all in saying, “We maintain strong links to scientific institutions because the general technologies underpinning our solutions emerges from scientific thesis…[This means] we only implement new features or functions after a rigorous validation process, especially because we are asking people to trust us with their health and well-being.”

Dealing with high volumes of data is not without risk, particularly when it’s shared with third parties.

See also: Digital Innovation in Life Insurance  

Prangley has pointed to recent concerns over how sensitive data is being used to highlight the challenges faced, “The key is to anonymize and protect data, and have customers consent to sharing it on the understanding it will be used solely to improve their health.” This insight is driven home by Lethenborg, who said, “Transparency about how the data will be used is essential to building trust.”

Digitization has already brought new products and services that have had positive medical and scientific impact. As Prangley said, “Technology has connected people and changed how we relate to each other. There [are] arguments for and against this of course, but in the context of health and wellbeing we believe it’s a great thing.”

With mental health and musculoskeletal problems as the leading causes of disability claims in every market, these companies can bring digital solutions and opportunities – and health insurers can also feel great about them.