Tag Archives: smart home

Insurance-as-a-Service 2021

It seems there are more insurtech predictions than ever for P&C insurance in the new year. Some of my favorites include; rise of the ecosystems, embedded insurance (in just about every product and service) and big strides for AI and telematics.

Ever since the insurtech wave began, massive disruption has been anticipated. Several startups have done just that. Some have enabled efficiency gains through automation. Others have made the customer experience easier and faster, from shop to quote to bind and everything in-between. Usage-based insurance solutions are changing how insurance is consumed through pricing based on usage amounts or personalized degree of risk. All sorts of new companies are simplifying insurance policy language or organizing information in one place. Many intend to create insurance-as-a-service, or proactive insurance.

Despite all of these advances, the insurance model itself still remains reactive. The claims model is probably the most reactive part of insurance; services generally do not begin until after a claim is made. And there is a five-day average lag from time of loss until a customer initiates first notice of loss (FNOL). The promise of telematics crash detection is beginning to change this dynamic, allowing for immediate claim services. GM’s recent OnStar automatic crash response is one of numerous telematics concepts that detect and engage proactively. However, adoption rates and insurer activation are currently very low.

Should insurance prevent, detect and mitigate losses proactively?  

Smart home sensor technology offers a similar promise by detecting and preventing losses. Water shut-off and leak detection systems can both identify and prevent damages. Distracted driver prevention and driver coaching technologies can avoid accidents altogether.

So, should insurance go beyond traditional reactionary services and serve to prevent, detect and mitigate losses proactively? The short answer is usually a resounding, yes. After all, fewer losses are of mutual benefit to both customers and insurers alike, not to mention for society at large. There are some pockets where insurers are already helping mitigate losses, but there are several barriers to broader prevention and detection remaining.

Barriers to proactive insurance models

Loss control is a well-leveraged capability by insurers mainly in commercial lines. Safe work places for workers compensation claim avoidance, fire safety prevention and fleet driver programs are a few examples. In contrast, personal lines have been underserved because safety programs are costly to administer. Loss prevention for personal lines has been centered on risk selection and pricing, thus underwriting. Home and auto lines loss prevention efforts have paled in comparison, focused on issues such as FAQs or free replacement of washing machine supply hoses. Such efforts have not demonstrated meaningful benefit.

Insurance company discounts have not kept pace with customer expectations for smart home sensors. Costs to install are another barrier. Although usage-based insurance can generate significant savings, much of the marketing attention is devoted to switch-and-save or attracting new customers. This may be just one reason for low adoption rates, often around 5% of an insurer’s portfolio. Tackling the issues of discounting, promoting or explaining technologies and addressing privacy concerns could go a long way to achieving higher adoption. And advancing technologies like telematics to coach and guide drivers to prevent accidents calls for much more customer engagement.

See also: How to Accelerate Innovation: Pairing

The road to claims-as-a-service has some deeper issues to resolve. Crash alerts can only bring value once false positive alerts are screened and customers are thoughtfully and carefully engaged following a detected incident to ensure that making a claim is warranted. Meanwhile, FNOL contact centers are designed and staffed for inbound phone calls, dispensing only generalized information while gathering information until a licensed adjuster is ultimately assigned – which can be a day after FNOL or longer. Even though loss intake can happen around the clock, getting access to decision makers is often sequenced to the dissatisfaction of customers. 

Insurance claims processes actually limit the degree of guidance and advice due to risk concerns. Yet, a proactive model calls for addressing urgent and emergency needs regardless of reporting an FNOL. So, there are a host of risk tolerance, structural, skill and mindset barriers for incumbent insurers to resolve.

What’s next?

The future of insurance as-a-service, especially for claims, requires an action-based model that leverages on-demand support vs. generalists, guidance vs. unbridled options, rapid response vs. assignment hand-offs and on-demand experts vs. sequenced specialists – all of which are inherent in today’s claim process. Discounts, technical support and expert care will go a long way to increase adoption, and some are beginning to materialize, which is good news.

Perhaps 2021 will be the year for insurance-as-a-service to take another step forward.

Insurtech 2020: Trends That Offer Growth

The insurance industry has undergone a transformation over the past five years. Once manual and paper-based, insurance professionals now recognize the overwhelmingly positive impact technology has had on efficiency and customer relationships.

We can expect the acceleration of tech-enabled customer experiences that promote dynamic customer interactions and empower the insurance industry to deliver tailored solutions and products to meet customers’ personal risk advisory needs. Here are a few of the innovations we will see take off in 2020.

  • Pay-as-you-go car insurance. This unique approach to car insurance is especially appealing for urban consumers who own a car but rarely drive it. Rather than forcing occasional drivers to spend money on the same caliber of coverage as someone who drives every day, on-demand insurance means car owners can activate coverage only when they need it or pay per mile. The program requires a significant investment in technology that provides direct, self-service options for consumers, but we’ve already seen Liberty Mutual and Metromile offer this flexibility. We can expect many of the larger brands to begin offering similar options.
  • Self-service capabilities. Sometimes it’s just not feasible to call an agent when a need or question arises. Modern consumers increasingly want the convenience of DIY options to allow them to secure coverage or access information on their own schedule. To meet that demand, we’ll see self-service portals offer a wider range of features, including risk rating, on-demand premium quotes, home inventory solutions and claims processing. There’s also a growing demand for virtual adjuster technology and drone/satellite integration that help speed claims processes. Many agencies aren’t aware that their carrier partners even offer these tools, so be sure to ask.
  • Smart home claim avoidance/prevention tech. You’re probably already familiar with tools that track driving habits and offer discounts on auto insurance. A similar tech is emerging to help homeowners head off costly insurance claims on some of the most common mishaps. For example, a large portion of claims are related to water damage, such as a pipe bursting or an old water heater that fails. By implementing smart home sensors, automated controls and other Internet of Things devices, insurers can help homeowners mitigate the damage. For example, a sensor installed on a water heater can help monitor its structural integrity and remaining useful life, giving homeowners a heads up if it looks like a leak is imminent. In addition to offering premium discounts for participating in such a program, carriers might also provide incentives for replacing risky appliances ahead of time to avoid the risk of claim. Other solutions might involve installing a flood sensor or automated water control valve, which would send a mobile notification if a pipe bursts while no one is home, or even automatically shut off the water to prevent major damage. Some carriers already offer smart home kits for free to avoid these types of claims, and, while some homeowners might be a little concerned about privacy issues at first, I expect we’ll see this become table stakes soon.
  • Deeper data insights to drive business growth. With threats of a potential economic slowdown beginning to percolate, we’re starting to see signs of a hardening of the market in commercial lines. In many cases, premiums are rising, and business customers are looking at all options to save money and reduce costs. Agencies need quantifiable data and insights from smart analytics to help commercial customers strike the right balance of risk, coverage and cost.

That means the demand for industry-wide data analysis will grow substantially, as agents and carriers need measurable and accurate insight into what’s going on across industries — what customers in similar business sectors are buying, what the risks are and what are any potential gaps in coverage. Combined with their experience and knowledge, comprehensive industry analysis tools will enable agents to see the big picture and give business customers data-backed recommendations to ensure they receive just-right coverage.

See also: Is Insurtech a Game Changer? It Sure Is  

The future is tech-enabled

In the coming year and well beyond, consumers will increasingly demand greater transparency, a higher level of service, and on-demand solutions from their insurance carriers and agents. This means adopting innovative technology will become a norm rather than a novelty as the industry digitizes to provide a more modern experience.

The good news: A wide array of insurtech solutions are now available, providing accessible and affordable tools for even the smallest independent agencies. Adopting insurtech solutions can not only improve agency efficiency, allowing agents to spend more time with customers, but also help agencies spot opportunities for growth. This powerful combination can deliver substantial ROI for investment and position your agency as a modern, tech-savvy partner for both consumer and commercial customers.

How Technology Is Changing Warranty

Let’s take a brief trip down memory lane.

In days past, whenever consumers wanted to make a major purchase—say, for a large appliance or the latest electronics—they had to leave the house and visit their local retailer. If they were concerned about the well-being of their new investment, they’d add a warranty plan once their transaction was complete. If something with their new fridge or stereo system went wrong, they’d need to pick up the phone to schedule a service visit.

Things have changed. Let’s take a look at just how much technology is influencing purchasing habits and changing the warranty experience for consumers, retailers and providers.

Click for Coverage

Today, when consumers need to make purchases both big and small, they’re often opting to make them online. For big box retailers, incorporating additional warranty protection on their websites to accompany those purchases is no sweat; they’ve got the capability and budget to do so. But what about smaller retailers?

According to a report by CBRE Group, about 30% of e-commerce retail is sold by small and midsize companies. While many of these companies might want to offer online consumers the benefits of product protection like their big box counterparts, integrating third-party warranty protection with a retail e-commerce platform can be cumbersome. But some providers have cracked the code and developed apps that allow smaller retailers to level the playing field and easily establish and manage valuable warranty programs.

Another technology solution being explored is blockchain. For as long as anyone can remember, returns, warranties and service contracts have required proof of purchase. Blockchain capabilities can eliminate that need by decentralizing record-keeping, so all relevant parties can instantly access a digital proof of purchase, as needed. Innovative companies are already jumping on board and using blockchain to improve industry collaboration, increase customer satisfaction, boost efficiency and reduce prices.

Make the Connection

As the Internet of Things grows and consumers replace their obsolete, non-IoT devices, the true benefits of connectivity will continue to be revealed. For example, smart home technology will take the guesswork out of claims. Service providers and technicians will no longer be forced to rely on a customer’s diagnosis of the problem, because devices will accurately relay data about malfunctions or damage in real time.

See also: How Tech Is Eating the Insurance World  

Administrators will be able to better identify issues and potentially help the customer find a resolution via phone or chat, without a service visit. If a service visit is needed, the customer representative can approve repairs and estimate out-of-pocket costs in advance simply by using the data already available.

But before the advantages of this new technology can be enjoyed to their fullest, there are some obstacles to overcome. The complexity of connected devices can be a lot to tackle for many consumers. Without the help of a professional, new device setup and network connections can be time-consuming.

Recognizing the opportunity for increased customer satisfaction, streamlined processes and lower costs, service contract providers are stepping up their game to offer plans that not only cover repair and replacement but tech support, as well. This kind of 360-degree service plan can help simplify the consumer transition to the fully connected home experience.

Go Custom

Thanks to the intimate connection to products and data offered by IoT, the opportunity to customize service contracts and protection programs has never been greater. Driven by constant data collection, warranty analytics can be employed to create extended protection plans that categorize failures, identify customers who are most affected by these failures and key in on potential causes. These “intelligent” plans can help determine and customize proper coverage levels guided by each customer’s risk profile.

The opportunity to apply the data extends beyond the connected home to products on the road. Now with the help of analytics, the failures, causes and costs that affect drivers most can be identified to help create intelligent protection programs for automobiles.

Known as telematics, these systems facilitate the transmission of vehicle diagnostic data. Telematics can record a vehicle’s condition to provide quick, efficient analysis that can isolate an issue before it becomes a real problem. This technology can also simplify next steps by alerting the provider to the issue and directing the vehicle owner to the closest repair shop with relevant parts in inventory. This kind of efficiency can help consumers remedy potentially dangerous and costly situations early on, while also reducing expenses for service contract providers.

See also: Common Error on Going Digital  

While some may long for the old days, the benefits of new technology offer a chance to look on the bright side. For providers, retailers and customers, advancements have changed the warranty protection experience for the better and will continue to do so for years to come.

Disruption of Rate-Modeling Process

How emerging technologies may transform insurance rate modeling

Insurance rate modeling for mass-market consumer products such as P&C, health and life relies heavily on macro risk factors, the “law of large numbers” and building pools of risk. Broadly speaking, outside of specialized lines, relatively little customer-specific data is used in developing rates. Incentives, such as “safe behavior” discounts, are used primarily to encourage good behavior and to help ensure that low-risk prospects do not feel unfairly represented by their premiums. A practical reason for limiting the process to mostly high-level analysis is that large volumes of data are both hard to collect and to analyze on a discrete level. But emerging technologies are starting to remove some of these limitations, potentially creating ways to optimize risk portfolios in consumer-oriented insurance products.

I have written several articles now talking about the potential for the Internet of Things (IoT) in loss prevention and claims facilitation. While much of my focus has been on technologies related to smart homes, arguably more progress has been made in auto telematics and wearables. Data on driving behaviors and personal biometrics of an extraordinary number of people are now being tracked in real time. These data sets may be used to do more than determine the fastest route to work or calculate the remaining target steps you need to take in a day – the data may be a treasure trove of environmental and behavioral information for insurers. Similarly, smart home devices such as connected smoke alarms and leak sensors, along with home security systems, wireless door locks, etc. are beginning to paint a picture of the risk profile in the home at a level never seen before.

But the technology advancements do not stop at the increase in data availability; much of the emerging opportunity has to do with new computing models and “the cloud.” Not long ago, the resources needed to model to an individual rating outweighed the value. But we are now in a world where additional computing resources can be launched with the simple click of a button and disparate databases can easily be joined together for comparison. In other words, the discrete data now exists, and the computing power needed to analyze on an individual level is finally within reach.

See also: How Tech Is Eating the Insurance World  

Tiptoeing in

Recognizing that technology may enable improvement on both sides of the risk pool by potentially better identifying both low- and high-risk candidates, insurers are beginning to evaluate options to model risk on a more discrete level. This enhanced lens on data may be one of the most interesting opportunities in the insurance market to-date. The availability of this data, and the associated computing power to process it, is arguably one of the core pillars of the insurtech revolution – but this discussion is for another article. In the meantime, we are seeing early tests toward enhanced data sets in four key markets: health, life, auto and home.

1) Health and Life – Early tests around wearables conducted by major health and life players seemed more to be assessments around consumer comfort with insurers potentially getting a peak into your lifestyle. For example, there have been several examples of fitness trackers given away as affinity products to members of a plan. Initially, there was broad skepticism that consumers would have interest, recognizing that insurers were testing the waters around one-day having access to more detailed lifestyle data. However, early sentiment proved positive, and the market is now seeing the use of individual diagnostic data expanding in the role of premium calculations. Automated collection of this data is not hard to imagine.

2) Auto – Many auto insurers are exploring real-time driving data analysis along with innovative safe driver rates through OBD data collection – with some starting to require it for certain program participation. Consumers, eager to lower their insurance costs, seem to be more than willing to share how fast they drive or how hard they turn when less expensive rates are in play.

3) Home – It’s easy to see how early wins in health, life and auto may translate into the homeowners market. Already, new smart home rates are entering the market, and in these cases smart home products may “self-verify” their presence, removing doubt of whether a customer truly has safety devices installed in the home. As various IoT devices in the home begin to communicate with one another, the insurer has lots of new data that can be used to adjust risk down to a specific premise.

A Virtuous Circle?

In today’s world of rating, there is an imbalance of information that puts insurers at a disadvantage with insureds. Insureds must represent the value of their property, the current state of the property, the cause of loss when it happens, etc. Generally forced to assume that all statements are true, insurers must price uncertainty into the risk. But moving toward greater data transparency may very well be a win-win for both the insurer and the insured. Low-risk customers may be offered rates more in line with their risk profile. High-risk customers may receive higher premiums, but they may also have clear visibility into the factors affecting their rates and potential corrective actions. Insurers may have less volatility in their portfolio with a better understanding of where the losses may occur. Perhaps this increased data availability will result in lower rates for insureds at maintained or even improved margins for insurers.

But how does the overall market respond with more symmetrical information and greater transparency? More importantly, how do consumers respond when they realize the insurer now knows more specific details about them? What if the rating bar moved from basic personal information, like credit score and claims history, to allowing consumers to opt in for very granular inputs such as: how many steps you took today; whether you sped to work; whether you activated your alarm system before leaving your home? Putting aside the regulatory restrictions, the privacy concerns and the general creepiness of this concept, would consumers be willing to give insurers this very personal data in return for big discounts? If “yes,” would it further ensure good behavior of those that did opt in? Could a “positive self-selection” of sorts start to occur?

In consideration of these potential impacts, there are three economic phenomena that insurers model into rates that may be affected:

1) Adverse selection – People who most need insurance are most likely to buy it, and people less likely to have loss will opt out – e.g., older folks may opt for more health insurance, or safer drivers may choose less coverage than their daredevil counterparts. The bias of high-risk consumers to buy coverage over low-risk consumers results in higher loss ratios and raises premiums of those who participate. But if rates were lowered by removing the risk padding, would lower-risk customers be motivated to participate? Would the risk/reward ratio reach a point where self-insurers feel like the better bet is to participate with the marketplace?

2) Morale hazard – There is risk that insurers bear that insureds, knowing that they have insurance, will be lazy about protecting their belongings. Why lock your doors if insurance would cover a theft? But when behaviors can be monitored, do consumers act differently? Would “safe” people open up data on their personal lives in return for discounts? Perhaps let the insurer know how many nights a week the alarm is armed or the doors are locked for a lowest-rate option?

3) Moral hazard – This phenomena is when insureds take on riskier behavior when coverage is obtained. In other words, a driver who chooses to increase coverage then goes on to take greater driving risks, again, rationalizing the change in behavior as they are “paying for coverage.” Again it’s worth contemplating if behaviors would change by exposing behavioral data.

See also: Embrace Tech Before It Replaces You  

Arguably, through increased transparency, a virtuous circle may be created where better information leads to lower rates. Lower rates drive lower-risk candidates into the market; as more lower-risk candidate participate, losses are lessened, which further drives down rates. Additionally, the lowest-risk candidates are the most likely to participate in high-transparency markets, compounding the loss reduction and further driving down rates. Even better, bad actors who know they may not be able to change their behaviors may opt out.

I recognize I am ignoring huge hurdles for this type of transparency: regulatory constraints, privacy issues, consumer interest, etc., but I do feel strongly that early entrants into these types of products may see very interesting results. Basically, better information becomes the great equalizer…

Conclusion

New, high-resolution data sets along with the computing power needed to make them useful are finally here. While having this added information doesn’t necessarily serve as the silver bullet to perfect rate modeling, it certainly offers insurers an opportunity to refine their analysis and reduce the guesswork. Obviously, the effort to operationalize these new data sets may be significant, and, as noted above, there are certainly consumer and regulatory concerns as this highly personal data is used, but the potential is certainly compelling to consider. At the least, now is the time to start considering where these data sets would be useful as the industry contemplates a move toward highly individualized risk opportunities.

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.