- Where Insurance & Technology Meet

2013: Analytics, Engagement, Telematics, Disruption


We took out our crystal ball again to look at major trends for insurance technology in Canada for the coming year, and we found a collection of changes along with a disruptive technology or two.  We look forward to your views.

Megatrend – Purposive Analytics

As with 2012, we found a theme which seems be an umbrella over the others.  It is similar to the megatrend we identified for 2012, with a twist.  We’ll let David Bidmead, CEO of Marsh U.S. introduce our 2013 megatrend.  When asked by about opportunities and challenges for 2013, Bidmead said, “The first opportunity for 2013 I would say lies in analytics. There is a consistent request from our clients to help them make more informed decisions about the structure and cost of their insurance programs.”

For 2012, we projected that insurers (and some brokers) would be turning to analytics generally to obtain a better understanding of their business. In 2013, we see highly focused use of analytics to support specific strategic and operational objectives.

Analytics and Customer Engagement

The term ‘engagement’ needs to be quantified to be useful.  In a 2007 interview Richard Sedley, Director of Design at Seren, defined engagement as “Repeated interactions that strengthen the emotional, psychological or physical investment a customer has in a brand”.

For 2013, we see insurers implementing sophisticated anlaytic tools to track engagement programs against performance indicators, including leads, conversions, revenue, profitability, etc..  These monitoring systems will have to integrate with Customer Relationship Management (CRM) systems as well as with the policy, billing, and claims systems in order to measure the impact of engagement, and to allow the development of predictive algorithms to support up-selling and cross-selling (along the lines of

This has several implications for insurers.  First,  this level of integration will be challenging enough for organizations which have completed modernization of internal core systems.  It will be nigh unto impossible for those which have not.  One solution for latecomers to the modernization party may be to look at outsourcers and/or data aggregators to take over the legacy systems and to create integration patches to analytic engines.

Second, for independent broker companies, operationalizing the use of customer data could become be the source of channel conflict.  However, we expect that this will be resolved by insurers who will develop creative partnerships, including, possibly, extending the use of their own internal CRM and predictive analytic systems to the brokers.  Could this be the next generation of Broker Connectivity?

Finally, customers will expect to be able to use social media as a communications channel.  As an added bonus,  number of analytic tools are geared towards handling social media.  Any debate about supporting major social media as a communication channel will end.

Operational Analytics Turns Business Intelligence Into Intelligent Business

The implementation of data warehouses  has assisted executives and managers use analytics with dashboards, etc.  This functionality needs to be driven to the operational level.

Insurers are coming forward with more sophisticated offerings and options in order to compete.  To market and service these products effectively and efficiently, the front line workers (underwriters, marketing reps) will require anlaytic tools and automated support at the same level of the managers, but with a different, customer service, focus.  Let’s call this ‘Intelligent Business’.

Analytics in Action: The Telematics Landscape Takes Form

Although there are only two Canadian insurers with telematics based automobile insurance program at present, most practitioners and vendors with whom we have spoken agree that there are a number of large- and mid-sized insurers who are well into the planning process.  There are already ‘proxy’ implementations  (e.g., insurer mobile apps which track driver behaviour to recommend improved driving habits).

Telematics is a complex implementation, primarily because of the need for 1) experiential data,  and 2) modifications to underwriting systems.  We don’t expect to see a tidal wave of product launches in 2013, but we do expect to see some, and official plans for others.  These will help us understand how Canadian providers will define the Telematics insurance landscape.  It may also reveal how insurers plan to tackle other Usage-Based Insurance programs.

Technology Disrupts Insurance

This is the ‘man bites dog’ trend.  Our normal focus is either how the needs of insurance impact internal technology or how internal technology empowers insurance practice.  There is a trend for non-insurance organizations to utilize technology to either stray into the insurance world or obviate some of the requirement for insurance.

For example, we blogged last year on Google’s entree into the insurance quoting world.  Also, 2012 saw the licensing of a ‘driverless car’, developed by Google,  in several US states.  One of our colleagues in the Insurance 2023 Group – Catherine Kargas – has done some work on this and suggests that as such vehicles are introduced, the need for insurance will likely decrease (accident reduction rates in excess of 90%).  In addition, Catherine believes that with respect to liability, the car manufacturers may be interested in retaining the risk rather than using insurance programs.

Where to from Here

We think we have been in a transitional mode for sometime, with some organizations being able to maintain a business as usual stance.  We think this will change dramatically in 2013, driven by consumer demand.  We hope to share information about these trends, their driving forces, and currently developed solutions in The Chronicle, Newsletter, in this Blog, and at the 2013 Technology Conference.

We always welcome your comments here.  And with you the best for 2013.




Blair Currie

I think these predictions are quite good and will come true over the next couple of years. I’d like to add an opinion on which ones will have the largest impact and how some of these trends might converge.

To begin I’d like to preface these comments with a quote from Anais Nin, which I’m fond of saying: “We see the world not as it is, but as we are”.

Telematics will be very disruptive and can be used to your advantage.

As a career marketer with a Telematics Services Provider (TSP), I see the insurance world through my particular lens, which is different than many who read this blog. It has a bias, but at the same time it’s clear and well reasoned. I see Telematics as being a huge disruptive force that if the auto insurance companies don’t embrace then the automotive companies will take over this business. It is also a way for insurance companies to disrupt the market in their favour.

With every new safety feature that an automotive OEM places in its vehicle, the auto maker takes on more liability. If a vehicle has a heads-up display that does not show a deer that is 50 meters down the road, and the vehicle strikes that deer, who would be at fault? The automotive OEM will certainly can be drawn into legal proceedings.

Automotive OEM’s are already in the financial services business and it is only a small step to move into insurance. Some are already taking this step directly e.g., GM and others are working out deals with auto insurance companies e.g., Ford and State Farm.

At this time, only about 15% of all vehicles are “connected” with OEM-installed Telematics hardware. But that number is increasing by about 10 full percentage points per year. By the end of 2014, 35% of all vehicles will be connected. So the day of connectivity and built-in Telematics will be upon us very quickly.

It’s important for auto insurers to start thinking about the implications and indicated action of this development.

Consumer engagement

I look at the issue from the perspective of a consumer goods marketer. While I believe that insurance carriers can incrementally improve consumer engagement, I think it’s an uphill battle based on the current business model.

Currently Insurance Companies are positioned as Financial Institutions versus service organizations. Insurance companies interact with customers when they sign up for a policy and when they face a claim. Both are strained occasions. Upwards of 90% of drivers feel they are “above average” so they are not happy to pay what they see are high rates. Also, they think there should be immediate settlement of claims, which is not always possible. From the consumer perspective, it is difficult to feel engaged when the relationship is transactional and based on capital vs. service.

Insurance companies will need to deliver real service before this dynamic can change dramatically engagement scores. Telematics can provide an answer for this as well.

Data, Analytics and CRM

Insurers in the US and UK have approached Telematics from the perspective that the data collected should be used for establishing risks and rates only. This thinking perpetuates the financial relationship between insurers and policyholders and reinforces this idea that Usage based insurance (UBI) is all about rates or prices.

While Progressive has done well with this “price model” it may result in a “race to the bottom” for those insurers that follow it with UBI programs that are solely used to calculate pricing.

A better way would be to disrupt this business model and to share the data with drivers in a form of scores, driving tips and coaching.

If an insurance company shares the data with its policyholders in a refined form of Key Driving Indicators (KDI’s) and ratings against their peer group, then they can change the paradigm and add a service component to their offering. These scores and tips can be shared weekly and policy holders can track their progress.

The benefit to the insurance company is they then have an objective means to show those 90% of drivers that not all of them are above average. Further they can set targets to achieve for them to have a dialogue over time. And for the policyholders they can receive scores that will keep them alive longer and protect their second most important purchase – their vehicle.


To summarize I agree with many of these expected trends in insurance. The difference I have is that I feel that Telematics will be the most important and disruptive force. Moreover, Telematics can enhance consumer engagement at the same time. So the issues are related. BlogEditor

Well thought through comments, Blair. There are some examples of the engagement opportunities that Blair highlights that we have touched on before (e.g., providing feedback to drivers based on telematics data) and will highlight in future posts.


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