Tag Archives: sensors

Building Telematics Can Mitigate Risk

Commercial general liability insurers traditionally estimate business risk exposure of similar businesses based on variables like floor area and revenue. Advances in cloud computing and artificial intelligence are combining to offer insurers new, better variables to characterize risk.

Insurers generally understand that liability risk correlates to human presence and movement. A hair salon with twice the foot traffic should present twice the slip-and-fall risk. More expensive haircuts may reflect a business customer’s greater ability to pay but probably do not increase slip-and-fall risk. Indeed, risk should correlate linearly with foot traffic unless (1) traffic is so high that conditions become over-crowded and the risk accelerates, or (2) the building falls unoccupied. Measuring foot traffic and occupancy can also confirm that the insured’s description of its business corresponds to its actual business.

Progressive Insurance introduced new attributes to characterize driving behavior when it pioneered automotive telematics in the late 1990s, an early practice of usage-based insurance (UBI). Rather than insure an automobile based simply on the vehicle’s make/model and age and the driver’s sex and age, insurers could introduce newly observable attributes to better model risk:  distance, speed, time of day, etc.

Twenty-five years later, a similar revolution is stirring in building insurance. Advances in cloud computing, artificial intelligence, semiconductors and the internet of things (IoT) make it practical and inexpensive to measure foot traffic and occupancy. Rather than depending on the policyholder to estimate human presence, a process unlikely to deliver numbers that can be compared across businesses, human presence can be measured objectively and continuously. The information will also deliver an actuarial  basis for risk assessment over time.

Risk engineers are eminently capable of characterizing variables like floor surface, lighting and door placement. However, variables like occupancy that change continuously are effectively impossible to characterize during an annual visit.  

These sensors are not your father’s IoT. IoT that measures temperature, lighting, sound intensity, hail stone size or flood level are all first-generation devices that require negligible processing power, either at the edge or in the cloud. The new generation of IoT requires high-performance, low-power, edge computing devices to predict risk, not simply measure what is empirically evident.

Some insurers think of IoT data as the new FICO (consumer credit) scores for businesses. If a hotel’s ballrooms are always below the limit set by the fire marshal, that implies hotel management is willing to play by the rules. If restaurants and bars do not overcrowd their spaces, they are less likely to obstruct exits or understaff operations. Attention to the rules implies lower risk…and that business may be one the insurer will want to retain with lower premiums.

Foot traffic and occupancy data should be of value to the business owner as well as the insurer — if for different reasons. A cafeteria may want to use foot traffic data to plan food preparation to minimize food waste. Office tenants can use occupancy data for space planning: Does the business need more, less or different space in the coming year? A restaurant owner might want to compare receipts to foot traffic and customer dwell time to measure the effectiveness of sales staff. Does a business efficiently use its real estate? How does a company compare with its peers? Are there opportunities to use real estate more efficiently?

It is likely that not all policymakers will welcome a technology that measures occupancy — in the same way not all drivers have welcomed technologies that measure driving behavior. Conversely, businesses that welcome the sensors are likely to self-select as attentive to overcrowding… and reflect a lower risk. And once the sensors are in place, reverse moral hazard suggests that insureds will improve their behavior — justifying a discount offered in exchange for accepting the sensors.

Insurers can gain market share by identifying lower-risk properties and offering discounts. Higher-risk properties will see higher premiums and will either need to work with their insurers to reduce risk or will need to find new insurers — probably one that isn’t employing building telematics technology. The outcome of this trend is that overall commercial general liability (CGL) premiums will decline, in part because high-risk properties will be obliged to work to lower their risk profile.

With risk profile information in hand, property insurance may move to the embedded-insurance model, where insurance is provided by the property owner who is equipped to measure occupancy — and risk — in real time. If your staff is at home during a pandemic, premiums drop contractually. If you double the number of staff in a space, premiums rise. More tenants pay a fair price for CGL insurance, and more tenants are suitably insured.

Occupancy and foot traffic will not be the last variables to be quietly but accurately measured by Internet of Things sensors. Other attributes that will be able to be measured include the presence of adults versus children; whether persons are running or walking or sitting; the presence of door mats when it has rained.    

As the cost of semiconductors, cloud computing and cellular connectivity continues to decline, sensors will be cheaper to install and manage. At the same time, underwriters and actuaries will be able to accumulate new, invaluable data that more accurately assess risk and reduce the insurance costs of the 75% of customers who, until now, have been subsidizing the other 25% — now that we finally know who’s who.

The Sensor Revolution

An announcement by Google and insurtech BlueZoo last week signals the next level of deployment of sensors, a development that will not only let insurers price risk more accurately but will help them counsel clients on how to avoid those risks in the first place.

The announcement involves BlueZoo installing sensors in buildings that detect cellphones looking for WiFi signals. At the moment, rules of thumb tend to be used to generate estimates for the occupancy for restaurants, bars, ballrooms, etc. The BlueZoo approach, essentially counting cellphones, will be much more accurate. Unlike with traditional methods for estimating, the BlueZoo sensors will also be able to monitor constantly, letting insurers and building owners know about issues such as surges in occupancy.

Those surges can be correlated with risk and even used to alert the manager of, say, a bar that everyone should be alert to the possibility of a slip and fall in the bathrooms.

As intriguing as the Google-BlueZoo announcement could be for the insurance industry, it’s actually just the latest in a series of developments that will make essentially all information available on any issue at zero marginal cost. That’s because sensors can — and will be — everywhere. Sensors won’t need to be connected to the electric grid or to the WiFi networks that BlueZoo is using. They’ll be able to draw power even in remote locations, from tiny solar panels and batteries, and to connect to the cloud via cellular networks or satellites. Nowhere will be out of reach.

Lots of information will increasingly become available just because we’re all carrying sensors with us, in the form of our smartphones. Those sensors have been informing traffic management for decades now — when you see red show up on the route in front of you, you aren’t actually seeing cars slowing down, you’re seeing the phones in the cars slowing down. They’ll generate all kinds of other useful information, too, far beyond what BlueZoo and Google are using.

Other sensors will increasingly envelope us and map our world. While the recent fuss about space travel has been jaunts by billionaires, the far more consequential story is that SpaceX has carried nearly 900 satellites to space already this year. Those satellites will augment the world’s communication network while also providing continual updates with more more detailed images of the Earth than are now available. Those images will let insurers — among many others, including governments — track vulnerabilities to natural disasters, spot erosion and other developing risks and generally have a map of the entire Earth that they can monitor every day.

Cameras will continue to spread on Earth, too. We’ve all seen what the adoption of body cams by police officers has meant, and are now surprised when some public event isn’t caught on some camera somewhere. These days, cameras are just a lens plus a bit of battery and some memory, so they can be put just about anywhere at almost no cost and be connected to the cloud via WiFi or satellite. Even just the increased use of cameras on cars will capture massive amounts of new information as they drive around, and that information can be put to good use. (To bad use, too, but I’ll focus on the good for the moment.) Other types of sensors, notably lidar, will also be mounted increasingly on cars, especially as autonomous vehicles spread, and will generate huge amounts of new data, not just on traffic but on everything they pass.

Sensors will be built into just about every device, so they can warn owners before they break down, can sense water leaks and can provide any other sort of warning or information that might be useful. Sensors will increasingly even move into our bodies. Having them on our wrists has been helpful, but we’re not far away from being able to swallow sensors the size of a grain of rice that would provide real-time information on blood pressure, blood sugar and other measures that matter much more than how many steps we take in a day.

Add up all the ways that sensors, including cameras, will spread, and you have a full-on revolution in the information available to all of us, including insurers, to better monitor and manage our world.

You’ll note that I haven’t said when I think all this magic will happen. That’s both because it won’t be a single event — it’s already been happening for decades — and because a firm prediction is hard. I can tell you that two colleagues and I have written a book coming out this fall that refers to the infinite availability of information at no marginal cost as a Law of Zero that we argue will be firmly in place by 2050, with many of the benefits appearing well before then.

I’ll tell you more about the book as we get closer to the publishing date and, thus, more about the Laws of Zero, including the one on ubiquitous information. For now, it’s enough to start pondering where sensors can go in the short to medium term, how to harvest the information from the new sensors and from existing ones such as smartphones and how to analyze information in ways that improve decisions by insurers and many others.

There will be a ton of work involved — but profound improvements will result.



Winning With Smart IoT in P&C

Insurance companies long for a way to attract and interact with customers, rather than just hitting customers’ bank accounts every quarter for a premium payment or re-upping a contract at the end of the year. What if I told you that insurers could attract customers with smart home devices that generate interaction seven to 10 times A DAY — and that customers would initiate those interactions? What if that level of involvement in customers’ lives led to a Net Promoter Score (NPS) above 50 for the insurers? 

Those numbers are in fact possible, both with homeowners and with small businesses, through an approach that incorporates IoT to help people avoid P&C risks while fitting easily into their home and work lives.

We know because we’ve seen these sorts of numbers at Notion, which we began with a Kickstarter campaign and grew through insurance partnerships with Hippo, Nationwide and others before being acquired by Comcast this year. 

While Notion partners with insurers to provide homeowners and owners of small businesses technology to monitor for water leaks, fire, theft and more, there are a variety of ways to win with smart IoT in the property/casualty world. 

In our experience, there are two keys to winning strategies: customer-centric technology and a comprehensive economic case for investment.

First, the technology should deliver benefits, such as “peace of mind,” that customers value highly even though the benefits would be hard to quantify. In our case, customers interact so frequently with the Notion app because they’re checking their system to see if the front door opened around the time their child was supposed to be getting back from school, that it is a comfortable temperature across their home, etc. Those benefits don’t show up in losses averted or claims reduced but can do an awful lot to increase installation rates, to bolster loyalty toward an insurer, to boost NPS and to create opportunities for cross-selling other services.

Every company that has led with a “prevent water damage” message has seen very little interest among consumers. Even if insurers provide water sensors for free, the installation rate can be low if that is the only use case. But technology and messages related to broader home coverage and security resonate with consumers.

Let’s walk through Notion as an example of the trajectory that the “smart home” (and “smart” small business) can take. Auto telematics long required a device to be professionally installed and focused just on discounted premiums for good drivers, and had a slow uptake, so we took a different approach: We’ve focused on a do-it-yourself (DIY) approach and on making that more-than-economic argument for insurers.

We built an affordable system where consumers can monitor their home or small business from anywhere and easily grow to fit their needs. The Notion sensors monitor for water leaks, temperature changes, opening doors and windows, and sounding smoke and carbon monoxide monitors. All the information is collected wirelessly and is made available to the user through an app on their smartphone.

Most homes and small businesses can have key areas covered with just five sensors — total price for a five-sensor Notion Starter Kit is $199. 

Which leads us to the second key to winning strategies: a reasonable economic case for the IoT investment. Many technologies and programs aren’t there yet. For instance, a water shutoff valve that requires a professional installation may not pay for itself for 10 years — the initial cost is a high barrier. 

So, we started from scratch and came up with a program design that produces full ROI in just under two years — the kind of ROI that any business can appreciate. Just looking at water damage, there are about $10 million in claims each year per 50,000 homeowners policies. By investing in an $85 smart monitoring kit and program for customers, insurers can practically cut their water claims in half.

The ROI looks even better when you consider the other benefits to insurers outside water claim reduction: customer acquisition, customer loyalty, data insights and the potential for selling other services.

The large returns our insurer partners generate by preventing claims allows them to offer a kit at a discount plus offer discounts of roughly 3% to 15% on premiums to help drive adoption. Our partners say discounts could grow substantially as they gather data on losses prevented. (The high end of the discounts goes to those who fully outfit a house or small business, who have professional monitoring and whose setups can be verified by the insurer to make sure they’re actually being used.) 

While the discounts alone aren’t enough to generate full adoption even of free sensors, a curated flow of customer communication with a “what’s in it for me” message drives installation way up. (The same was true in telematics: Once messaging switched from discounts to security issues such as driving behavior, adoption finally picked up.)

While regulators were initially careful about what could be given away and what bundles should be allowed, they have become more comfortable with the IoT and understand that we’re all working together to benefit consumers. 

They have thus cleared a path for far greater adoption of the IoT, at a time when all trends were already pointing in that direction. According to Statista, the number of homes in the U.S. using smart security systems will nearly triple from 12.8 million in 2017 to 36.7 million by 2023 — meaning that more than a quarter of U.S. homes will have them. Revenue from smart home devices is expected to grow 17% annually for the foreseeable future. 

The trend is very much toward DIY: 47% of security system owners report self-installing their system in 2019, an increase from 27% in 2014, according to Park Associates.

The pandemic seems to even be accelerating the trends, both toward the use of IoT (because people are spending more time in their homes) and toward DIY (because people have more time, without their daily commutes, because people want to keep strangers’ potential infections out of their homes and because videos and chat capabilities on smartphones make “telemaintenance” easier). 

A platform like Notion can become the hub for all kinds of services that can be bundled with hardware or sold separately to make the lives of homeowners easier — for example, connecting a homeowner with a plumber when they have a water leak. With Notion, we have taken this one step further and created a direct integration in our app with HomeAdvisor. Once a leak has been detected, the homeowner can connect to HomeAdvisor’s network of certified professionals with one click. 

But that kind of service is just the beginning. In the same way that Tesla bundles insurance with its cars, I can imagine lots of maintenance-related services that could fit nicely into an IoT-based “protect my property” platform. When I say good night to my Google Home, it may remind me to do certain things around the house; why couldn’t insurers help inform homeowners and small business owners? 

Now there are winning structures for insurers to leverage IoT smart devices to connect and provide value to their customers — a win for customers and for P&C insurers.

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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.

4 Ways Connectivity Is Revolutionary

The Internet of Things (IoT) is predicted to support more than 20 billion devices by 2020, according to Gartner. This is a market that covers 60% of consumers worldwide, creating huge opportunities for industries to connect and engage with their customers.

Connecting with consumers hasn’t always been easy. Contact typically took place at points of sale, during claims and during renewal periods. Now, with the use of wearables, smart homes and telematics, insurers are connecting with customers on a continual basis and providing valuable feedback – and prices – based on activity levels. The business of insurance is complex, with core factors such as risk evaluation, long-term contracts and unpredictable settlements. However, the benefits of insurtech and the unlimited availability of new sources of data that can be exploited in real time have fundamentally altered how consumers interact with their insurance providers.

IoT devices are helping consumers and insurers get smarter with each passing day as these technologies bring promising results in helping insurers reshape how they assess, price and limit risks and enhance customer experience.

See also: Industry 4.0: What It Means for Insurance  

Connectivity and Opportunities

Numerous technologies have shown how improved connectivity can generate opportunities in the insurance industry beyond personalized premium rates. If implemented properly, IoT applications could possibly boost the industry’s customarily low growth rates. It may help insurers break free from traditional product marketing and competition primarily based on price to shift toward customer service and differentiation in coverage.

Several technology trends that are increasing connectivity in insurance include:

Extended Reality (XR) — XR technologies are altering the way consumers connect with society, information and each other. Extended reality is achieved through virtual reality (VR) and augmented reality (AR), which aim to “relocate” people in time and space. Eighty-five percent of insurance executives in Accenture’s Technology Vision 2018 survey believe it is important to leverage XR solutions to close the gap of physical distance when engaging with employees and customers.

Wearable Sensors — Reports indicate that the average consumer now owns 3.6 wearable devices. These technologies can mitigate claims fraud and also transmit real-time data to warn the insured of possible dangers. For example, socks and shoes with IoT apps can alert diabetics on possible odd joint angles, foot ulcers and excessive pressure, thus helping in avoiding costly disability and medical claims and even worst-case scenarios such as life-changing amputations.

Commercial Infrastructure and Smart Home Sensors — These sensors can be embedded in commercial and private buildings to help in monitoring, detecting and preventing or mitigating safety breaches such as toxic fumes, pipe leakage, fire, smoke and mold. This increases the possibility of saving insurers from large claims and homeowners from substantial inconveniences such as lost property or valuables. Savings can be passed to insureds who use these sensors.

Usage-Based Insurance (UBI) Model — Cellular machine-to-machine (M2M) connectivity and telematics link drivers and automobiles in entirely new ways. Traditionally, auto insurance has relied on broad demographic features such as gender and the driver’s age, plus a credit score, to set premiums. Now, through IoT devices, insurers can not only offer reward-based premiums but can provide a connected car experience to customers with feedback on weather, traffic conditions or driving habits.

See also: 3 Ways to an Easier Digital Transformation  

Strategy will play an important role in connectivity as insurance carriers transform legacy core systems into digital platforms that support deeper connectivity with their customers. This strategy must address a carrier’s ability to handle, process and analyze the new types of data that will emerge from the use of these technologies. Artificial intelligence will also have a big impact.

According to a recent study, 80% of insurance customers are happier and more content when they can connect with their insurance providers through various channels such as phone, emails, smartphone apps and online. Through the use of the IoT and connected devices, insurers will improve customer experience by shifting from reaction after an event has occurred to preventing losses digitally.