Tag Archives: wearables

Cognitive Computing: Taming Big Data

In the complex, diverse insurance industry, it can be hard to reconcile theory and practice. Adapting to new processes, systems, and strategies is always challenging. However, with the arrival of new opportunities, cultural transformation will go more smoothly.

Insurance companies that are considering how to plug into the insurtech landscape should understand the various models within the innovation ecosystem. Carriers have to weigh their options carefully before choosing between incubators and accelerators, or venture capital and partnerships, when creating their best internal and external teams.

The key elements disrupting the insurance industry include the Internet of Things (IoT), wearables, big data, artificial intelligence and on-demand insurance. Although well-established business models, processes and organizations are being forced to adapt, insurtech can be more collaborative than disruptive.

It is no secret that the insurance industry is responding to changing market dynamics such as new regulations, legislation and technology. With digital transformation, there are numerous ways technology can improve and streamline current insurance processes.

See also: Rise of the Machines in Insurance  

Cognitive Computing

Cognitive computing, a subset of AI, mimics human intelligence. It can be deployed to radically streamline industry processes. According to the 2016 IBM Institute for Business Value survey, 90% of insurance executives believe that cognitive technologies will have an impact on their revenue models.

The ability of cognitive technologies to handle both structured and unstructured data in new ways will foster advanced models of business operations and processes.

Insurance carriers can use this technology for improved customer self-service, call-center assistance, underwriting, claims management and regulatory compliance.

Big Data

Unstructured data is rapidly growing every day. For instance, wearables can provide insurance companies with massive amounts of data that can yield insights about their markets. Social media also produces a flood of data.

To harvest this data intelligently, insurers need to adopt the right analytical solutions to analyze, clean and verify data to customize their offerings according to their clients’ individual needs. Predictive analytics evaluates the trends found in big data to determine risk, set premiums, quote individual and group insurance policies and target key markets more accurately.

Linking the Two

Insurance organizations may have more data than they realize or know what to do with. Existing data is coming in from different core systems, and new data is being captured with IoT devices like wearables and sensors. Cognitive computing is the link to organizing and optimizing this data for use.

See also: Strategies to Master Massively Big Data  

Whether it is used to predict risk and determine premiums, flag fraudulent claims or identify what products a customer is likely to buy, cognitive computing is the way to ensure these goals are achieved. Sorting these trends among reams of data makes them more manageable and ensures that a business’s IT objectives link back to business strategies.

Over the years, systems will evolve through learning processes to a level of intelligence that can adequately support more complex business functions. Schedule a meeting with your executive team to examine risks, opportunities and insurtech synergies that can take your organization beyond the competition.

Emerging Tech in Commercial Lines

Historically, technology adoption within commercial lines organizations has been met with a wall of push-back, largely related to commercial lines being wrapped in a cloak of “art versus science” thinking. Because of risk and product complexity, commercial lines organizations believed that only highly trained and seasoned humans could be involved with processes and decisions.

Additionally, due to the predominance of large, enterprise-scale projects, characterized by protracted ROI exercises and IT resource allocation exercises, past technology choices generally brought out the “yeah buts.” (What are the “yeah buts”? This is the response to enterprise technology options, to which commercial lines product and underwriting heads promptly responded – “yeah, but that doesn’t work for us.”) In many cases, this was not an inappropriate response because of risk and product complexity. But, at long last, there is a change afoot, and it lies within emerging technologies.

SMA has been conducting research and surveys around emerging technology since 2010 to gain insight and understanding of insurance industry adoption and spending. In the past, results have predominantly trended across the P&C industry. However, the recent 2018 results reveal clear differences between commercial lines and personal lines organizations.  Even more exciting, commercial lines product segment and transactional differences are emerging. As the phrase goes: Vive la difference!

See also: Expanding Into Commercial Lines  

So, what does all this mean? SMA’s recent report, Emerging Tech in Commercial Lines: Ramping Up Adoption, covers eight emerging technologies that hold great promise for commercial lines organizations: artificial intelligence (AI), new user interaction technologies, the Internet of Things (IoT), drones, blockchain, autonomous vehicles, new payment technologies and wearables. How are commercial lines organizations viewing these technologies? Here are some examples that show emerging technologies are being viewed uniquely by varying commercial lines segments and processes:

  • AI – This technology garners the highest percentage of implementations of all the emerging technologies by almost twice the other categories, with 26% indicating so. Investment in AI exceeds the next closest emerging technology by more than 24 percentage points. The difference: It can drive straight-through processing for small business and simple specialty lines and support complex decisions for middle market, large national/global accounts and complex specialty lines. “Art versus science” well managed!
  • New User Interaction Technologies – This is another technology that is affecting small commercial lines as this product segment goes digital. But 67% of all responders see the value in customer experience, regardless of product segment, and 50% are focused on policy servicing.
  • Blockchain – While personal lines organizations are generally assessing the applicability of blockchain, commercial lines have found use cases and pilots. 42% of survey respondents believe that policy servicing and billing are the significant value areas. Global and complex lines of business are the first target areas.

See also: Top 5 Themes in Commercial Lines  

Other emerging technology examples and spending projections can be found in SMA’s commercial lines report. But the big takeaway for me is that, happily, the “yeah buts” are disappearing across commercial lines of business and products as executives search for and find emerging technologies that can improve business outcomes. Because of the way emerging technologies are being delivered by incumbent and insurtech providers, discreet value choices can be made without having to launch enterprise-level projects. Vive la difference!!!

Smart Tech Helps Older People, Too

New technologies offer insurers the opportunity to build more engaged relationships with their customers. Fitness-linked insurance programs, for example, are attractive to active people who have access to technology and a desire to use it. While wearables and apps are most closely associated with promoting physical fitness, technology is increasingly being put to use in lifestyle monitoring of the elderly and others in need of care.

Technology that is simple to understand and use works best. Some older people find the latest gadgets baffling. Even after a device has been set up and explained, they often have little confidence and remain skeptical of the benefits. Health problems make some devices hard to operate, while the cost and lack of access to technology is another barrier. Despite the challenges, the percentage of people using technology in later life is rising fast.

U.K. figures show that 75% of people 65-74 years old now have access to the internet and that more than one-third own a smartphone. Among the individuals over 75, one-quarter use tablets, and 41% have a social media account. Three-quarters of smartphone-owning older Americans use the internet several times a day or more. These numbers are all pretty close to those seen in much younger age groups.

It’s no surprise the baby-boomer generation is digitally engaged, but new technologies can also provide interventions for much older adults, and many of them are eager adopters. Aging populations create opportunities for products and services. The U.K. government has committed to invest in innovation to meet the needs that result from this demographic change.

See also: Insurance 2025: Smart Contracts  

Telecare and telehealth are technological interventions to deliver services at a distance from the provider. Smart homes, assistive robots, technology-based wellness and therapeutics can all promote an independent lifestyle for older people, not only providing for their physical and cognitive fitness but also entertainment, leisure and wellbeing.

There are reasons other than cost-saving for technological solutions to help older people remain independent, including assistance with everyday tasks compensating for lost physical or cognitive function. In Japan, where 25% of the population are senior, the predicted shortfall of caregivers by 2025 is likely to be met by nursing-care robots currently being developed with government backing. Caregivers also enjoy positive outcomes by experiencing less worry. For example, tracking how a person with dementia interacts with a virtual assistant device – the questions they ask it and how often, the tone and cadence of the voice – could help spot cognitive changes, as could analysis of onscreen scrolling and mouse movement.

Phones and tablets provide isolated people information and links to social networks for friendship, help and support. Technology sends reminders about medication. Sensors monitor sleep, kitchen activity and walking speed, and raise the alarm if a person has a fall. Behavioral data from self-learning intelligent software allows caregivers to analyze patterns of behavior, spot negative trends and intervene quickly.

Before insurers embark on building more digital engagement programs, it is important to know how they can appeal to the wide range of customers. It is important to maximize the potential for understanding how older adults perceive technology, and providing help with setup and support. In the Netherlands, several insurers now reimburse users employing home sensors, and others are experimenting with reimbursements on wearables. More will surely follow because technology might prevent hospitalization or worse.

See also: Solving Insurtech’s People Challenge  

Concerns remain over potential security and privacy risks that these technologies pose. Monitoring must be structured in an ethical way that is compliant with data laws, and there must be a person-centered approach ensuring tangible benefit for the person concerned. The pressure on health services is increasing as the numbers of elderly people continue to rise, and developed technologies that address these concerns can help reduce the overall costs of prevention and monitoring.

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.

An Insurtech Reality Check

If you’ve got your eyes set on technology that won’t move the needle this year, it’s time to reevaluate what can provide bottom-line results in the short term. AI and machine learning will have their day in commercial insurance. But what are you doing today to drive tangible business results? Insurtech does not have to be a “pie in the sky” endeavor. It can be deployed right now.

Just a year ago, the insurtech conversation was all about innovation labs, blockchain, IOT, wearables and, of course, AI. Now, the dust has settled a bit, and the realization has set in that those bright, shiny objects may take years to make a real impact on re/insurers’ bottom lines. While they are still undoubtedly vital to innovation, long-term success and survival, it’s important to strike a balance between “pie in the sky” and practical. Last year’s devastating catastrophes served as a catalyst for more focus on short-term solutions that can improve bottom lines—now. Not years from now. This swing to here-and-now solutions was recently articulated in an article by Ilya Bodner, founder of insurtech startup Bold Penguin, where he notes:

“Insurtech is moving rapidly now into commercial lines where the attention and intent is focused on solutions that will deliver a strategic and immediate return on investment (ROI)….Insurers are moving away from bright, shiny, insurtech objects and toward service partners, emerging technologies and solution providers with a return on investment more immediate than promised for five years down the road.”

I second this sentiment. P&C risks are changing, as evidenced by 2017’s $144 billion in global insured losses and a commercial lines combined ratio of 104%. And, while a strong market made many insurers whole last year, that is not a guarantee going forward. The next hurricane, flood or wildfire won’t wait for you to innovate. Insurers must find ways to bring innovation to their bottom lines now. Don’t get me wrong, pie in the sky is good—and it is necessary. But insurers must strike a balance between their long games and short gains. You need both.

Caution: The hard truth

I don’t have to tell you that following last year’s back-to-back hurricanes there was an outcry about how the models got it wrong (of course, it didn’t help that some modelers put out early and grossly inaccurate estimates that incited market confusion and concern). Here’s the hard truth: Insurers also got it wrong. Got it wrong by using a single view of risk; by not taking advantage of innovations in data; by taking too long to operationalize data; by waiting for the perfect, utopian platform (in-house or commercial) to be built or delivered; by expecting legacy analytics software to deliver the scalability, reliability and insight required to act efficiently and effectively. No longer can insurers approach risk The. Same. Old. Way. Risk is changing. You must change with it. And the good news is, integrating insurtech in a way that helps you better assess and manage the evolving landscape of catastrophe risk doesn’t have to be time-consuming or costly, and it can produce immediate results.

Here are a few of the challenges that insurers face that insurtech can help them address, in the here and now:

  • Reality: Models provide a “framework for thinking; they don’t represent truth.” Evan Greenberg, chairman and CEO of Chubb, recently stated, “Given there have been three one-in-100-year floods in 18 months, how can Harvey represent a 1% chance of occurring, as the models suggested? Models provide an organized framework for thinking; they don’t represent truth.” Now, we all know models serve an important purpose, and our clients can derive insights from modeled data within our platform. But models must be taken with a dose of good old-fashioned human judgment. Models and the outputs are nuanced. It’s all about identifying the right models and model components that best represent your lines of business, geography and business practices. But it’s also about balancing resources and business value with this expensive exercise. You need to have an intelligent conversation about model nuances—and figure out the “so what” questions that models provoke but don’t answer.

See also: Can Insurtech Rescue Insurance?  

  • Reality: You can’t handle all the data. There’s a gap between the wealth of data now available and an insurer’s ability to quickly process, contextualize and derive insight from that data. Insurers are generally frustrated by a lack of process and an easy way to consume the frequent and sophisticated data that expert providers put out during events like Harvey, Irma, Maria, the Mexico City earthquake and the California wildfires. Beyond the sheer volume of data, insurance professionals are expected to make sense of it by using complex GIS tools. In reality, you have all this data but no actionable information because you can’t effectively make sense of it. Even insurers with dedicated data teams and in-house GIS specialists struggle to keep up. (SpatialKey tackles this problem by enabling expert data from disparate sources (e.g. NOAA, Impact Forecasting, JBA, KatRisk) and putting it into usable formats that insurers can instantly derive insight from and deploy throughout their organizations. We do the processing work, so our clients can focus on the analysis work.)
  • Reality: Your best data is your own, but you’re not benefiting from it. It’s one thing to be in possession of data, and quite another to be able to realize its full value. Data alone has little value. One of our clients, for example, needed a way to re-deploy its own data to its underwriters, so we helped the company integrate an underwriting solution that would put its data, along with expert third-party data, in the hands of its underwriters—all from a single access point that would consolidate disparate sources and drive enterprise consistency.
  • Reality: Your customers expect on-demand; you should, too. Your customers don’t want to wait for a quote or go through a lengthy process to submit a claim. Our society is instant everything, and while commercial insurance may not be held to the same real-time pressure as personal lines, it is moving in that direction. When you need the latest hurricane footprint, you need it now, not four hours from now. When an earthquake strikes Mexico City, you need to understand your potential business interruption costs today. When a volcano is erupting and no drones are allowed in the surrounding airspace, you need a geospatial analytics solution that can help you provide advanced outreach to insureds and do the financial calculations to understand actual exposure. Likewise, when your underwriters are trying to win business, you’d rather they spent their time evaluating the risk than searching for information.

Who knows what this hurricane or wildfire season will hold. The question is, are you prepared to handle it better than last year? What changes have you made to strengthen your resilience and that of your insureds? What has been learned and applied for meaningful results? It’s a misnomer that insurtech and disruption go hand in hand. Some insurtech solutions are built to complement—to drive efficiencies, cost savings and underwriting profitability—not necessarily replace existing processes or legacy systems. Data and analytics is an area where insurers, brokers and MGAs can still improve their bottom lines yet in 2018.

See also: To Be or Not to Be Insurtech  

Take down the pie and dig in

My intention is not to dilute the importance of up-and-coming insurtech technologies, like AI and machine learning. They will undoubtedly help insurers compete as risks become more complex. My point is that those longer-term technological investments must be tempered with an understanding of what technologies will help move the needle in the present. You can strike a balance between pie-in-the-sky insurtech and insurtech that works for you now.