Tag Archives: Rick Huckstep

Will Technology Kill Auto Insurance?

The auto insurance industry has been experimenting with technology and tools that are completely changing the way we think about cars.

Self-driving vehicles, ride-sharing and vehicles that include their own insurance in the sticker price are all recent innovations — innovations whose long-term effects are not yet known.

With the rise of autonomous vehicles and ride-sharing came questions about liability and its related coverage: Who will insure self-driving cars? Who is liable in a ride-sharing accident scenario? As vehicle fleets replace individual ownership, who should carry the coverage necessary to pay medical bills, repair costs and other losses in case of a crash?

The changes on the horizon have prompted some commentators, like Deutsche Bank’s Joshua Shanker, to predict that today’s auto insurance industry simply won’t exist in 20 years.

Is the demise of auto insurance imminent? Is it likely? Here, we explore the pressures on traditional auto insurance and the ways the field may shift in the next one to two decades.

Self-Driving Cars: Who Will Insure Them?

Self-driving cars are predicted to change the driving habits of entire nations — and to significantly reduce the cost of auto insurance. A 2015 study by Metromile and Ferenstein Wire estimated that self-driving vehicles would save their owners nearly $1,000 a year on insurance premiums on average, according to Gregory Ferenstein.

The study was based in part on data showing that, as of 2015, none of Google’s self-driving vehicles had been in an accident caused by the technology, only by human error, reported Adrienne LaFrance at The Atlantic. Since then, there have been notable instances of tech errors leading to accidents, including the March 2018 death of a pedestrian. More on that in a minute.

Still, many commentators have drawn the same conclusion from the data: Prevented accidents mean prevented claims, which will reduce premiums. Even big name investors like Warren Buffett have made such predictions with regard to self-driving vehicles, CNBC’s Elizabeth Gurdus reports.

See also: Industry 4.0: What It Means for Insurance  

The Reality on the Ground

Yet the reality may not be so easy to achieve. For one thing, self-driving cars have yet to be tested in the same wide range of conditions human drivers face daily, says Peter Hancock, a professor of psychology and engineering at the University of Central Florida. Seeing how these cars handle bad roads, inclement weather and similar challenges is essential to understanding whether they’ll really replace human drivers — and how to insure them if they do.

In 2015, Volvo CEO Håkan Samuelsson said that Volvo would accept “full liability” for any losses occurring when a Volvo vehicle was in full autonomous mode, indicating a future in which liability coverage for self-driving vehicles is a question of product liability, not driver behavior.

Yet, to date, other automakers haven’t rushed to join Volvo in making a similar promise. While Google and Mercedes have self-insured, as a rule “auto manufacturers are not that keen on taking on the insurance risk,” says Rick Huckstep at the Digital Insurer. Automakers have spent billions of dollars on developing automated technologies, and “they didn’t do this to then have to carry 100% liability for whatever happens on the road.”

Revising Timelines

Even if self-driving cars adopt a commercial liability or product liability approach to coverage, thus eliminating the need for individual drivers’ coverage, a 10- to 15-year timeline may still be ambitious, says Simon Walker, group chief executive at First Central Group. The technology, while ever more widely tested, is not yet commonplace.

Determining regulatory, licensing and liability questions will likewise take years; attempts to start that process now have met with uncertainties because the tech isn’t in common use. Customers will need to gain confidence in autonomous vehicles, and their driver-required cars will have to age their way onto the scrap heap.

All this is unlikely to happen in just 10 years, or even in 20. And with 10 to 20 years, auto insurers have time to adapt. Some have already begun, in fact. Julia Kollewe at the Guardian cites Adrian Flux, a U.K. insurer, which in 2016 announced what it called the first-ever auto insurance policy for driverless vehicles. The policy covers not only the conventional situations other policies address, but also autonomous-vehicle-specific topics like software updates, satellite or navigation system failure and loss or damage from hacking.

If this U.K. company can do it, says Julia Eddington at the Zebra, so can U.S. companies, although they may face more complexity due to the overlapping world of state and federal regulations. As of mid-2018, however, 29 states had enacted driverless vehicle liability laws, according to the National Conference of State Legislatures, which could pave the way for faster adaptation by existing auto insurers.

Improved Safety Features: Are Crash-Proof Cars Possible?

Self-driving cars aren’t the only way that technology may end the need for auto accident coverage. Safety technology is improving, as well, and Volvo’s promise to cover liability for its cars while in autonomous mode isn’t the only goal the automaker has set to change the vehicle liability landscape.

In 2008, Volvo announced an ambitious plan: to create a crash-proof vehicle that would result in zero injuries or deaths, and to do it by 2020. In 2013, according to Viknesh Vijayenthiran at Motor Authority, and again in 2016, Volvo announced its intention to stay on track to create its injury- and death-free vehicles by 2020.

Volvo still has a little more than a year to reach this goal, and its statistics indicate the company is on the right track. Volvo won a 2018 Which? Award in the U.K. for “the company’s solid safety record that put it ahead of other short-listed candidates.”

Awards and strong statistics are evidence that Volvo is moving in the right direction when it comes to safety, but until this technology is perfected, insurance coverage remains a necessity — and completely autonomous driving technology still has a long way to go.

A Car and Its Coverage: A Package Deal?

Tesla is also betting on the safety of its technological advances, and in a way that presents an additional challenge to traditional insurance companies: by including auto insurance coverage in the sticker price of their vehicles.

Tesla is experimenting with selling “insurance and maintenance included” vehicles in Asia, according to Business Insider’s Danielle Muoio. The price for insurance and maintenance incorporates Tesla’s data about the car’s safety features, including its autopilot system. By including the insurance price in the car, Tesla says, the company believes it offers a better deal to consumers, because many auto insurance companies don’t account for the autopilot system in the same way Tesla does.

Tesla may have a point. “If you’re hoping to shave down your premiums, buying an automated vehicle might not be the right move,” Shift Insurance head of business development Raphael Locsin tells Entrepreneur. However, some companies do consider certain other driver assistance features, like electronic stability, when calculating discounts.

Insurance companies’ hesitation may be prudent at the moment. A March 2018 Tesla crash with the autopilot turned on proved fatal for the driver, according to Jack Stewart at Wired.

Selling vehicles, autonomous or otherwise, with the insurance included in the sales price offers a hybrid approach between purchasing coverage from traditional auto insurers and placing the burden on automakers to cover their vehicles as consumer products. While Tesla has gambled on the approach, it remains the only automaker to do so; even the products-liability model has had more buy-in from the makers of self-driving vehicles and their technology.

“Insurance included” models seem the least likely of the self-driving insurance options to threaten the traditional auto insurance industry in the next two decades. Yet they indicate a willingness of companies to take risks to try new models, which are worth noticing.

What to Expect in the Near Future

Self-driving vehicles piloted by technology that prevents accidents is a powerful vision of the future. It provides a sense of excitement and hope.

It also provides challenges to traditional auto insurance companies, many of which are already struggling with auto insurance premiums in a world where many people have eliminated vehicles from their lifestyles. For a $220 billion industry that supports more than a quarter million jobs, the threat is significant, says Patrick Lin at Forbes.

Yet technology’s death knell for auto insurance may not be as close as it appears.

Driver involvement in vehicle operation is likely to be a necessity for many more years, and drivers will need insurance as long as they must take the wheel. Human error will continue to be a factor in accidents. And demand for insurance against theft, acts of nature and technological glitches will persist even in a world where cars do their own driving.

What Will Operations Look Like in 2028?

In a 2011 article in Insurance and Technology, Kathy Burger enumerated several big technological changes in the insurance industry since 2001, including the rise of big data, the ubiquitous nature of cell phones and social media and an increased emphasis on data security and privacy.

Seven years later, these once-big innovations are par for the course. P&C insurers and insurtech companies are now positioned to use these tools — which scarcely existed in 2001 and which were only beginning to be broadly embraced in 2011 — as the foundation for the next wave of major changes in the insurance industry.

Now, let’s look at some of the biggest rising insurtech trends today to get an idea of where they’re likely to take us 10 years from now.

Auto Insurance

In July 2015, Jayleen R. Heft published an article at PropertyCasualty360 with the provocative title, “Will the auto insurance industry be obsolete in 20 years?”

Heft cited the work of Deutsche Bank research analyst Joshua Shanker, who argued that by 2030 self-driving cars and ride-sharing services would occupy so much of the automotive market that setting rates based on driving data would no longer be necessary. Instead, the companies behind these vehicles and services would simply “insure their cars like any other product,” Heft said.

While self-driving cars and ride-sharing services like Uber and Lyft are already shaking up the auto industry, predicting the demise of auto insurance by 2030 — or by 2028, even — may be premature. Pay-per-mile auto insurance is gaining popularity. Spearheaded by companies like Metromile and Esurance, the pay-per-mile model charges a base rate, plus a specified rate for each mile driven.

“Each mile usually costs a few cents,” Craig Casazza explains in an article for ValuePenguin. “So if you drive 200 miles per month at a rate of five cents per mile, you would be charged $10.” In addition, Metromile only charges drivers for the first 250 miles driven in any given day in most states.

Tracking Mileage With Telemetrics

Both Metromile and Esurance use telemetrics to track miles driven to calculate each month’s rate. Metromile calls its program the “Metromile Pulse,” and it uses the car’s OBD-II port to track mileage.

Other insurance companies have experimented with telemetrics for a number of years but haven’t connected rates directly to miles driven. Instead, they use the vehicle’s data to adjust rates in a more complex, less transparent manner, Casazza says.

See also: Future of P&C Tech Comes Into Focus  

The pay-per-mile model is increasingly popular with younger drivers, who often have the option to abandon their cars entirely for the convenience of Uber or public transportation, but who are happy to keep the freedom of their own vehicle when they feel they can more directly control its costs. For these drivers, who include a growing number of those currently under age 40, auto insurance may survive into the 2030s — although it may operate in a very different way.

Shanker’s prediction that auto insurance will fade into product liability insurance over the next decade, however, may be prescient. In an October 2017 article in Business Insider, Danielle Muoio explored Tesla’s partnership with Liberty Mutual to sell insurance as part of the purchase price of the company’s vehicles. The plan, called InsureMyTesla, factors in the car’s autopilot feature while setting rates and comes up with a lower cost than other insurance plans as a result, Muoio reports.

Insuring Shared Rides

Similarly, while ride-sharing company Uber currently requires drivers to carry their own auto insurance coverage while also providing supplementary insurance, the company may switch to providing all insurance coverage on its cars as it continues to move into the self-driving vehicle market.

Given Uber’s bumpy ride in producing self-driving vehicles, however, the company’s total abandonment of conventional auto insurance expectations for human drivers may be more than 10 years out, Tech Radar’s Leif Johnson and Michelle Fitzsimmons said in May 2018.

Adding Value and Processing Claims

“Digital technology destroys value,” warned a March 2017 article by Tanguy Catlin, Johannes-Tobias Lorenz, Christopher Morrison, and Holger Wilms at McKinsey & Co. According to the authors, “although digital technology propels some companies to become clear market winners, for many more its impact depletes corporate earnings and the overall value of an industry. Consumers, not companies, are often the ultimate winners.”

To stay relevant, the authors said, insurance companies must “meet customers’ expectations, which have been transformed by digital technology.”

In 2018, insurance companies seeking to stay ahead of the curve often accomplish this task by breaking down their own silos and presenting a quick, clean digital interface that makes it easy for customers to interact with the company and for staff to understand customers’ needs and provide clear, consistent answers.

Bridging Human and Automated Workflows

By 2028, companies are likely to have struck a balance between automation and human intervention — a balance that many insurers are currently struggling to find, Rick Huckstep writes in an article in The Digital Insurer. Automation offers both the opportunity to improve claims response and the challenge of providing the “human touch” that customers also demand, as Roger Peverelli and Reggy De Feniks put it in a December 2017 piece for Insurance Thought Leadership.

The goal will be to use automation in a way that doesn’t feel automated. As AI technology continues to develop, this goal may be fully realized within 10 years.

The automation of many of the current day-to-day tasks faced by insurance agents will, in turn, change agents’ jobs. Some commentators are already predicting that today’s field agents will be obsolete by 2023, replaced by “bionic agents” who have fully integrated digital tools, including AI and machine learning, into their work.

How Automation Influences Customer Expectations

Customers are already demanding the knowledge and flexibility a bionic agent exemplifies. As Jason Walker writes at PropertyCasualty360, “Consumers today want the ability to conduct insurance business anytime, anywhere for simple transactions, while at the same time be able to have a relationship with a professional to discuss complex policy questions or walk them through the claims process.” As this option becomes ever more normalized for customers, the demand for the same experience in insurance will rise. as well.

The result? By 2028, “digital natives” won’t only be insurance customers — they’ll also be insurance agents who leverage technology not only to serve customers but to demonstrate real value in the insurance process.

See also: Key Strategic Initiatives in P&C  

Automation and Claims Processing

Field agents aren’t the only insurance industry professionals who will see their work change dramatically by 2028. The ways insurance companies process claims will change, as well, driven in large part by customer expectations.

For instance, Ben Rossi writes at Information Age that about a fifth of young adult customers (ages 18–24) expect insurance companies to use drone technology to survey property damage and gather information for claims.

This idea “would have been unthinkable as recently as a couple of years ago,” Rossi says. Ten years from now, sending a drone to a damaged building or factory site may be as commonplace as sending a human adjuster has been for the past 10 years.

For many of us, 2008 feels like it was yesterday. In 2028, our memories of 2018 will feel the same — yet the insurance industry is poised to be eons ahead of where it currently stands, and insurtech will lead the way.

3 Keys to Selecting the Right Platform

Customer experience (CX) consulting firm Walker predicts that, by the year 2020, customer experience will overtake price and product as a key brand differentiator. To remain competitive in the consumer-driven era, EY advises insurers to provide an omni-channel environment where consumers can move seamlessly between channels.

It’s a difficult feat for insurers to accomplish given the siloed nature of their legacy systems and lack of digital readiness, but, according to Rick Huckstep, there is a way to leverage these massive core systems while gaining digital capabilities, through partnerships with insurtech digital platform providers.

Huckstep says that digital platforms allow insurers to capitalize on investments already made in technology by building the agility and responsiveness necessary for online distribution into the new digital front end. But what should insurers look for in a digital platform to ensure they can deliver the omni-channel environment consumers are demanding?

Excel With Digital Platforms

A global study of 1,000 insurance executives conducted by Insurance Nexus revealed that 59% of insurers are already relying on relationships with third-party resources to realize digital innovation goals. In PWC’s CEO survey, more than 80% of the executives responding plan to do so over the next three to five years.

That’s because digital platforms can speed the transformation of insurers and put them on the fast track toward digitally enabled, direct-to-consumer distribution. Simply offering online channels of engagement won’t necessarily ensure carrier success.

To meet consumer experience standards in today’s world, insurers should seek partnerships with digital platform providers who focus on providing the following key attributes:

Consumer-Centric Online Storefront   

Accenture surveyed more than 32,000 consumers globally and determined that as many as 50% are already purchasing online. As insurers improve the strength of their digitally enabled, direct-to-consumer channels, those numbers are sure to escalate. Executives surveyed predict that 90% of interactions will occur through digital channels within the next five years.

As consumers move from the more personal experience of researching and purchasing coverage through an agent to digital channels, the insurer’s online storefront becomes representative of their brand. Whether consumers establish a relationship with the insurer and become a loyal customer or seek out other insurers that offer a more personalized online experience, will all depend on the strength of the online store.

Big Commerce found that 78% of consumers feel more comfortable buying online when pictures that depict personal interactions are included as part of the online storefront. This highlights the need consumers have to feel connected to their insurers while still engaging in anytime, anywhere purchasing.

Digital platform providers that focus on creating a customer-centered buying experience by improving the efficiency of the quote-to-issue lifecycle demonstrate a respect for the consumer’s time and instill good will. Automated prefill capabilities, for example, take much of the burden of completing an application off the customer and put it on the insurer, demonstrating that the customer comes first in the insurer’s operations.

The ability to automatically quote multiple policy types from a single application is another way insurers can attract consumers to the online storefront and establish loyalty.

A leading insurer that sells property lines through digital channels recently offered consumers the option to receive quotes on homeowners and auto by filling out one simplified application. The insurer now consistently provides 80,000 quotes a month to online insurance consumers.

Uniting Operational Silos for Cross-Channel Consistency

The largest group of insurance customers use both online and offline channels when interacting with insurers. This is particularly true in distribution, where J.D. Power found that 74% percent of shoppers purchasing coverage start transactions online, but only 22% actually close the purchase through a consumer-facing call center.

The situation becomes complicated for insurers when you realize the fluidity required to meet consumer expectations for cross-channel engagements. Too often, the consumer is asked to restart the transaction when changing from one channel to another, damaging the customer experience.

This happens because of the disparate and distributed nature of insurers’ back-end systems. With customer information locked up in operational silos, insurers have a difficult time creating a cross-channel experience that meets customer standards.

According to Huckstep, digital platforms can solve for operational silos by using existing core systems as the system of record and building the agility and visibility necessary for omni-channel engagement into the digital front-end.

It’s easy to envision the process by breaking it down. The web front-end is consumer facing, acting as the online storefront for consumers and agents alike. Information entered into the storefront is automatically updated across all core systems, courtesy of the digital distribution platform, creating a consistent source of data that is visible from a single vantage point.

When consumers move from an online channel to the consumer-facing call center during the purchasing process, agents have complete visibility into information entered online, facilitating a seamless transition from one channel to another.

Managing the Digital Transformation

Accenture reports that as many as 51% of consumers are already purchasing online, but Aite Group has found that only 20% of auto insurers and 7% of homeowners carriers are currently selling products online. Those that aren’t online are missing out on a chance at a lot of revenue.

To grow their digital footprint, insurers will need to change the way they engage with consumers. For instance, Mintel’s study of shoppers who have property and casualty insurance revealed that a growing number (39%) feel that insurers should provide apps to make buying and managing policies easier.

Progressive has recently introduced HomeQuote Explorer, an app that simplifies the purchasing of homeowners coverage by offering consumers a simplified application and four quotes on coverage.

According to Tricia Griffith, Progressive CEO, “You fill in a couple fields, and you get a home quote from one of four companies. One of them is the Progressive home quote and then [quotes from] three other companies that we work with closely.”

The service is free and allows consumers to comparison shop coverage from a group of carriers that Progressive trusts to provide quality customer service.

Digital innovations like these have broad implications across the organization. Seasoned digital platform providers, which have undergone many successful transformations, understand the challenges. They’ve created transition plans and have the talent on hand to guide the organization and ensure results following implementation.

Fast-Tracking Omni-Channel Distribution

Accenture reveals that platform-based business models are the goal of 94%, creating ecosystems where insurers and outside digital resources join forces in synergistic relationships that promote asymmetric growth.

As insurers embrace relationships with insurtech providers on digital distribution platforms that unite back-end systems and provide a single vantage point to the information contained therein, they are able to rapidly evolve into omni-channel insurance providers, seamlessly meeting consumer needs as they move across various mediums.

For example, a top-five insurer partnered with a digital platform provider and built combined teams with shared strategies and goals to meet the insurer’s objectives and enable an initial rollout of digital capabilities within two months. Since that time, the insurer has doubled sales on a year-over-year basis. Because the platform is scalable, the insurer continues to experience growth by adding agents, products and markets with no down time or service interruptions. As consumer preferences evolve, the insurer is able to expand channels and products to ensure future profitability.

Omni-channel engagement is the way of the future for the insurance industry. How is your organization meeting the demands for change?

Metromile: Pioneers in Digital Engagement

Imagine a world where the insured has a continuous digital engagement with the insurer. Where the “insurance product” is a value-add service that offers more than just financial protection. In this world, the insurance brand becomes “sticky,” and churn becomes a function of product development, not promotional pricing. In fact, price is no longer the only buying criterion. This is the world of Metromile, the pioneers of digital engagement insurance.

To find out more for InsurTech Insights, Rick Huckstep spoke with Dan Preston, the CEO of pay-per-mile auto insurer Metromile.

SAMSUNG CAMERA PICTURES

Value trumps price, hands down, every time!

Metromile was ahead of its time when it comes to digital engagement. This is the world of insurance protection where customers buy insurance cover because of the continuing value it provides, not just because of the price it is offered at.

In recent times, the buying of insurance has become associated with searching for the cheapest price. Online buying guides advise customers to always shop around for the best price and never auto-renew. Even the regulators force statements on renewal notices to advise customers to shop around. This is commoditization in all its glory!

Which is good for consumers, right? Maybe at the point of sale, but, when insurance is sold below premium, it means someone else is paying for it. Until renewal time, when premiums are increased significantly.

All this does is irritate the customer, further diminish trust in insurance and cause the customer to start all over again looking for a new insurer! What a waste of time and effort for everyone!

The case for digital engagement in insurance

The big problem in any price-driven market is that cost of sales is a killer. Price points only ever go down, sales and marketing costs don’t (not at the same pace anyway), and this continually squeezes the whole supply chain. In the intermediated world of personal lines insurance, the addition of friction and inefficiency simply compound the cost (and margin) issue for insurers.

No matter how hard the insurer tries to build and promote a trusted brand, the uncertainty of premium pricing always undermines it.

The building of brand loyalty takes time, and insurers don’t hang on to customers long enough to do so. For traditional insurers, their only opportunity to show value is through the claims experience. However, all too often, the insurer fails to seize the day and ends up disappointing the customer. (Read “Democratizing insurance claims restores trust for customers” and the RightIndem solution)

And yet customer feedback clearly shows they want more in the way of value. And are willing to pay for it!

See also: How Sharing Economy Can Fuel Growth  

Earlier this month, at the Digital Insurer conference in Singapore, James Eardley from SAP Hybris presented the findings of a current report from Ovum, “Driving Engagement through Value Creation.” The report found that customers would pay higher premiums for value engagement.

Interestingly, when you look at the demographics, the Under-35s showed the highest willingness to pay more.

Turning the Insurance Product Into a Lifestyle Product

The advances in digital technology in the last decade have given insurers the means by which they can create “sticky” insurance products. Once they’ve “won” a customer, they can now hang on to that customer. They use enabling tech such as telematics, mobile apps, wearables and IoT devices to create ways of connecting and engaging with customers continuously.

As a result, we’ve seen the introduction of digital engagement products based on new sources of data, personalized to the specific risk conditions of the customer. These new technologies enable insurers to radically shift from being the provider of an enforced product to a provider of a value-added service. The adoption of this enabling technology gives insurers the ability to dynamically improve risk ratings, to personalize premiums and adjust policy conditions on a continuing basis. The traditional approach of a single, point in time questionnaire can be replaced by a continuing assessment and review approach enabled by these new technologies.

As Maria Ferrante-Schepis writes in Flirting With the Uninterested, “Insurance companies, when you really think about it, are not just in the protection business. They are in the ‘lifestyle continuity business.’”

Digital engagement insurance in action

Great examples in life and health are Vitality and Oscar along with insurtech platforms such as Fitsense and Sureify. Here, wearable devices combined with mobile apps enable digital engagement with the insurance brand to promote a healthy lifestyle. In so doing, the app becomes a lifestyle product, part of the customer’s daily routine. This makes it a lot harder to churn come renewal time.

I covered this previously here about wearables and digital engagement in life and health.

In home, the adoption of IoT devices has done more than (just) create a means for digital engagement. The IoT-enabled smart home moves the insurer into the loss-prevention space. Now, insurers can build insurance products that are focused on preventing the loss altogether. (Read about IoT and loss prevention in this article about digital engagement in home insurance.)

The latest example to catch my eye comes from the innovation team at Halifax, the U.K.’s third largest general insurer with 3.2 million customers.

Bringing together a number of insurtechs, the Halifax home insurance app is built on Surely’s insurance platform as a service.

Surely provides the core insurance functions and integrates with third-party data sources to provide loss prevention and mitigation. These data services include Fing to connect all smart devices together, HomeServe Labs, which uses its Leakbot for water leak detection, and Fibaro for fire detection. The platform also connects to presence and entry-detection sensors, such as Samsung SmartThings, and all sensors are integrated into the app and provide the Halifax customer with up-to-date information about his house and home contents.

The Halifax app even takes a weather feed to warn of extreme weather conditions that can affect the home.

Prevention is always better than cure, right!?

Metromile is the pioneer of digital engagement

When it comes to auto, the combination of in-car telematics and mobile phone tech has seen the launch of pay-as-you-go and pay-how-you-drive insurance products. It’s a subject I’ve covered before, including articles like this featuring U.K. on-demand auto insurer Cuvva.

The real expert on this subject at the Digital Insurer is Andrew Dart, who writes our Connected Insurer page.

Which brings me to the main subject of this month’s article – Metromile.

It represents everything that defines #InsurTech as we know it today, and yet it pre-dates the social media tag by half a decade! Metromile is a seven-year-old U.S. auto insurer I first wrote about back in 2015. The business model is based on a pay-per-mile insurance product, which is wrapped with other services to enhance the car ownership experience for customers.

To enable continuous customer engagement, Metromile uses tech in the form of the Metromile Pulse (a device that plugs into the car’s on-board diagnostic port) and a smart driving app on the customer’s mobile. The company recently announced Series C and D investment rounds that took the total money raised to $205 million. It’s an impressive sum that puts the company in the insurtech fundraising upper quartile.

You can watch the firm’s CEO Dan Preston explain the Metromile insurance product in this short YouTube video.

The thing that struck me about Metromile is that it doesn’t say anything about “insurance” when they describe what they do. Here’s what they say “About Us” on their website:

At Metromile, our mission is to empower drivers by creating a more connected and informed car ownership experience.

By taking our deep understanding of data and transforming it into information and services that make having a car less expensive, more convenient and smarter, we aim to make the urban car experience as simple as it can be. And for some, we hope to make car ownership a possibility where it wasn’t before.

They’ve literally taken an insurance product and turned it into a lifestyle product!

Leveling the playing field for low-mileage drivers

When it comes to auto insurance, the main risk factor is how often drivers are on the road. If you’re not on the road, then factors such as claims history, driving behavior or condition of car are insignificant. In the case of auto, those who don’t drive very much subsidize the higher-mileage drivers. This is because traditional auto insurance products take a blunt-instrument approach to assessing driving time.

See also: Cyber Insurance Needs Automated Security  

Metromile says that customers can save on average $500/year on auto insurance (which is roughly 40% to 50% of the typical cost of insurance). You will see something similar in the U.K. from Cuvva. The company claims its pay-as-you-drive insurance can save drivers as much as 70% of traditional insurance premiums.

Creating value that EVERY insurance customer gets

In a recent call I had with CEO Dan Preston, I asked him about digital engagement and the Metromile model. He told me, “There are typically three interactions the insurer has with their customers. When they sell a policy, when they renew and when they receive a claim. There’s nothing in those interactions that adds value. Even the claims process is so full of friction that it becomes an unpleasant experience for the customer. It’s the place where NPS [Net Promoter Score] goes to die!

“When we started Metromile we quickly learned that customers want more than just a good claims experience. They want value through digital engagement.”

Metromile provides a frictionless claims experience with their new AI claims assistant, AVA. (PRNewsfoto/Metromile)

Here’s the thing that Metromile figured out early. By creating value over and above the insurance product, the company creates value that EVERY Metromile customer benefits from, not just those who might go through a successful claims experience.

Dan explained, “We set out to build Metromile into more than just an insurance business. We wanted to help our customers manage the cost of running a car. This includes everything from maintenance and regular servicing, to parking and speeding tickets.

“One of the early features on the app was a feature to help drivers avoid parking tickets by informing them of street sweeping schedules. We took publicly available data in the San Francisco area and laid that over our customers’ movements. Using the app, we were able to direct customers to parking areas that would not risk parking tickets. Some customers reported that the savings in parking fees more than paid for the cost of our insurance!”

Dan explained, “Ultimately it became a data collection exercise for us to collect data unique to the car and the driver as we went into new areas. In many places, the data we needed was in PDF format. We found ways to extract the data and still provide the features in the app.”

As Metromile moved into new jurisdictions, the company found that the data it wanted and needed to support the value-added services in the app were not always universally available.

Metromile’s win-win through value and loyalty

This is the real point of digital engagement – creating a win-win.

The customer gets value from the digital engagement with a lifestyle product (and tangible benefits such as lower parking fines!). And insurers see less churn, better (risk) data about customers and a greater sense of loyalty/connection/trust.

This is where behavioral economics kick in. It is this sense of trust and loyalty that directly links to lower levels of claims fraud and embellishment. (See Lemonade).

None of this would be possible in a traditional auto insurance product. Metromile has exploited technology to enable this digital engagement. The key is the Metromile Pulse: a dongle that customers plug into their car to read the on-board telematics data and that connects to the mobile phone and the Metromile app.

This allows Metromile to know when the car is being driven and when it is not. In turn, this allows Metromile to price on a per-mile basis for insurance, turning it off and on accordingly.

Metromile’s AVA delivers an automated claims experience

Metromile’s latest tech addition enables an automated claims experience. At the time of an incident, data captured by the app and the dongle is used by Metromile to settle a large number of claims. Many of them automatically and instantly.

See also: Effective Strategies for Buying Auto Insurance  

The company can do this because it is not waiting on a claims adjuster to collect information to support a claim. Instead, through the customer’s Pulse device, Metromile is able in many cases to verify and validate a claim without human intervention. In these scenarios, there is no reason to not pay a claim instantly.

The turning point for Metromile came about a year ago when it became a fully licensed carrier. Dan told me, “We’ve been handling claims in-house for about year now. In that time we’ve launched AVA, our AI claims assistant and the most exciting product launch to date at Metromile! We wanted to create a different experience for customers, one that was different to the traditional experience, with much less friction for customers.

“For the customer, all they want is to get back on the road. But for the traditional carrier, they won’t settle until they’ve got all the evidence that they need to justify the claim. In the traditional claims experience, often the problem is that the carrier only has the word of the customer to go on. Trust isn’t very strong in this relationship, and the result is that it takes time.

 “With Metromile, the Pulse can verify what the customer is telling us. Our tech can verify facts such as speed and location and time. The customer doesn’t need to provide this data because we already have it. This leads to instant payout or for the Metromile app to organize the repair and servicing of the vehicle.

“It’s another win-win because the instant and automated approach delivers a better customer experience by reducing cycle time and making it easy to claim. For Metromile, it lowers the cost of handling claims, which benefits customers in the long run by lowering premiums.”

(See here for more on chatbots, AI and customer engagement)

The lesson for insurers: Give more to Get back more

So there you have it! Everyone’s a winner when the insurance product is built around a digital engagement model. Customers get value from the money they’ve paid for their insurance purchase (not just a safety net if they suffer a loss). Insurers get value from lower customer acquisition costs, less churn, lower operating costs and reduced fraud.

They also get one step closer to one of the biggest innovations from insurtech – personalization (and that’s a story for another day!).

10 Insurtech Trends at the Crossroads

The emergence of insurtech has reshaped the strategic insurance agenda. Here are the top 10 insurtech trends as we enter 2018.

Insurtech Trend #1 – Automation will replace human effort across the entire insurance value chain

This is a trend that is not unique to insurance. But it is a trend that will significantly affect the insurance sector. This is because much of the insurance industry still operates in pre-internet ways. It is also because many personal lines are being atomized. Small parcels of insurance protection cannot be packaged and sold with human input and remain cost-effective. It is also because customers demand it. They want a purely digital experience that does not require human contact when a machine will do nicely, thank you.

One to watch: ZhongAn

Insurtech trends article: Is the Rise of the Digital Advisor the new InsurTech Game Changer?

Insurtech Trend #2 – Insurance premiums will become highly personalized based on greater tech-enabled insight on customers and their individual risk

When you add together the massive growth in new sources of data together with tech-enabled data science, it is inevitable that premiums will become highly personalized. This will be enabled by tech such as wearables, telematics, IoT and smartphone apps. Not to mention the ability to build insights through relationships that exists across data sets. Gone will be the days when people of the same age and gender, with identical cars or homes living on the same street, will pay the same premium. In the future, other factors will apply to reflect greater granularity in their individual risk profiles. Data science will become a key set for underwriters and actuaries.

One to watch: Sherpa

Insurtech trends article: Insurance distribution is about to get personal

Insurtech Trend #3 – The blockchain era has begun, and there will be a rapid shift from pilot to production of distributed ledger technology

It is hard to find a major insurer that is not involved one way or another with a blockchain initiative. This will only continue as this disruptive tech continues to prove its ability to provide a viable solution. Of course, there are still some big questions to answer in terms of scale, performance and security, but those answers will come. The big breakthrough in insurance for blockchain will be in the back office for the complex and global world of wholesale, commercial and reinsurance (which is desperately in need of moving into the internet age).

One to watch: ChainThat

Insurtech trends article: R3’s partnership with ChainThat is one giant leap for insurance

See also: Insurtech: The Year in Review  

Insurtech Trend #4 – The lines between the old and new will blur as insurtech becomes mainstream by 2020

The defining characteristic of the Fourth Industrial Revolution is speed of change. This certainly applies to insurtech and its impact on the world of insurance. The rate at which insurtech startups are popping up all over the world is not surprising. Everyone wants a piece of this $7 trillion cake. The incumbents have responded, too. By investing in, partnering with and acquiring insurtechs, the incumbent insurers have wholly embraced the movement. This will lead to the creation of whole new digital brands, designed to cannibalize traditional business. And because it is simply too expensive and takes too long to transform legacy operations, the incumbents will ring fence and run them down.

One to watch: Munich Re

Insurtech trends article: Digital transformation is the strategic imperative no insurer can ignore

Insurtech Trend #5 – Digital engagement through lifestyle apps will change the relationship dynamic between insurer and insured

Lifestyle apps are the norm. It is hard to find anywhere in the world where this is not the case, so lifestyle apps are the perfect vehicle to provide the peace of mind that customers want when they buy insurance. Instead of the annual chore of hunting for the lowest-priced insurance then having nothing more to do with it unless you suffer a loss, lifestyle apps offer value on a daily basis. This makes them sticky, which, for insurers, means less churn. They also give insurers greater insight into their customers’ behavior, which means better-informed risk assessments and personalized premiums. And they build brand loyalty, which, if you believe in behavioral economics, will result in lower levels of claim embellishment and fraud.

One to watch: Metromile

Insurtech trends article: Metromile, the pioneers of digital engagement

Insurtech Trend #6 – The all-in-one insurance policy is here to stay

It has taken longer than I predicted back in 2015, but the all-in-one insurance policy is here. From a customer’s perspective, the all-in-one policy makes perfect sense. Especially for the millennials and Gen Y’s. Why can’t they simply have one relationship with one insurer and have everything covered in one go? And it’s not just for younger generations. Imagine giving the insurer the details about your car, home, health, travel, pets and possessions. The insurer gives you one overarching policy, a fair price and the ability to flexibly adjust the cover as needed. Operating on a membership model, the platform can provide safeguards and advise the customer on good and bad decisions. This is AI territory and relatively straightforward to automate. IMHO, this is a winner; watch this space!

One to watch: Getsafe

Insurtech trends article: Getsafe take the Lemonade model one step further

Insurtech Trend #7 – New models will challenge the traditional insurance value chain 

In the digital economy, where insurance is embedded into lifestyle products or distributed through ecosystems, the traditional insurance model doesn’t work. The inherent inefficiency in a highly intermediated value chain, too dependent on human effort, makes insurance products expensive. When as much as 80% of premium is lost on distribution, leaving barely a fifth for the risk pool, you know something has to change. In the words of Jeff Bezos, “your fat margin is my opportunity.” These new models will see the carriers squeezed as the reinsurers provide risk capital directly to digital brands. Regulatory frameworks will be reworked to reflect these shorter value chains that don’t require the many layers they have today.

One to watch: Amazon

Insurtech trends article: Redefining the insurance value chain

Insurtech Trend #8 – Lemonade has set the pace in Insurtech 2.0; copycats will follow

The first phase of insurtech was all about distribution and data. Then came Lemonade. In September 2016, they launched in New York, and a year later they cover around 50% of the U.S. population with their renters and home insurance products. For me, Lemonade have defined Insurtech 2.0. Many insurtech startups claim to redefine or reinvent insurance, but they simply don’t, whereas Lemonade has. It is inevitable that the copycats will appear. Some will be insurtech startups, although they will need to be as well-marshaled, experienced and funded as the Lemonade team to have any chance of success. And some will be the incumbents, which will have a go at creating a Lemonade model from within. These will almost certainly fail!

One to watch: Lemonade

Insurtech trends article: Lemonade really do have a big heart, killer prices and instant everything

See also: Top 10 Insurtech Trends for 2018  

Insurtech Trend #9 – Claims settlement will become an automated, self-service and quick-to-pay experience for customers

Insurers spend too much of a customer’s premium on handling the claims process. This is because the process is manual. And because the carrier wants to double-check the claim. And because customers don’t always tell the truth. And because there is too much time in the whole process. And and and and and. The insurtech solution is to put the claims process in the hands of the customer. This sounds counter-intuitive, but it isn’t. Taking a self-service approach, the customer provides video and images at FNOL and is in control of the claims process. Automated reviews of claims handle the vast majority of cases and award instant payouts. The money can be with the customer in a matter of hours. No long processing cycles, no time to embellish the claim and high levels of customer satisfaction. Those that fail the automated review are the exceptions handled by the carrier, which is what they’re looking for anyway! This will become the norm for claims management, once the fears and resistance of the lifelong claims directors can be overcome.

One to watch: Rightindem

Insurtech trends article: Democratizing insurance claims restores trust for customers

Insurtech Trend #10 – Tech-enabled loss prevention will become a key feature in the insurance product

Advances in everyday technology are increasing the ability to predict the likelihood of an event or outcome occurring. In home and motor, tech is being used to model behavior and identify exceptions. Sensors and phones and devices are all collecting data that define our individual norm (as opposed to a collective norm). As a result, any deviation can be instantly assessed, and action can be taken. To handle scale, this is 100%-automated, driven by AI and machine learning. Which means the opportunity for insurance is immense, because, instead of being a passive risk taker (which carriers are today), insurers will become active risk managers.

One to watch: Surely

Insurtech trends article: Digital implementation is the strategy insurers have been looking for

Insurtech prediction lists from previous years 

Looking forward with insurtech Insights – 10 predictions for 2017

Daily Fintech’s 2016 predictions for InsurTech

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