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What’s a Nice Insurer Like You Doing with a Sensor Like That?

American Family Insurance and Microsoft Corp. recently announced the establishment of a business accelerator which will focus on home automation.  According to the release, “the accelerator will help the next generation of startups create advancements that can help lead to safer and smarter homes.”

We also think that this will help American Family get a head start on a road that leads to smarter insurance products, pricing, and services.

We’d like your thoughts here.

Is telematics just a gateway drug? 

Telematics is all the news these days.  Although we have a low double digit count of insurers who have announced or implemented telematics-enabled usage-based insurance (UBI) programs in Canada, it seems that the die is cast.  Most commentators agree that, over a 10 year period in North America, there will be a penetration rate of 20%-35% of insurance policies written on a UBI model.  UBI will be entrenched in the fabric of insurance in Canada.

The outcome?  This will likely cause some disruption, but not the end of the world for telematics-free insurers.

Unless, telematics just the entry point to a new model for insurance.

It’s about the (big) data …

Writing in Insurance Networking News, Chunka Mui, of Devil’s Advocate Group, Mike Boyle, from Perseus Technical Strategies, and INN editor Chris McMahon posit that while insurers have always relied heavily on data, things are changing more rapidly and more radically than common wisdom suggests: “market competition is likely to soon be defined by how well carriers leverage data-based decision making across every aspect of their business, including rating, product design, underwriting, claims, acquisition, retention and cross-selling.”

The authors cite 3 winds fueling this particular tornado:

  • Telematics, collision avoidance and self-driving technologies are lowering accident frequencies, which will drive down premiums;
  • The volume and velocity of the data created by these advanced automotive technologies will accelerate the importance of data mastery and analytics
  • The rate of consumer adoption will require insurers to accelerate speed to market, or suffer from adverse selection

And, while the focus is on automotive technology, we believe the spill over to other lines is inevitable.  The industry is coming to a “defining moment”.  The authors conclude:

Those who lead must prepare for a technologically-driven disruption, or risk being saddled with bad risks and withering into irrelevancy. CIOs and other senior leaders should create robust simulations of the business under different assumptions about adoption and the impact of the technology…

Queue the Internet of Things

Posting on the Celent blog, recently, Donald Light, the analyst firm’s Director, Americas Property/Casualty Practice, focused on Apple’s announcement of two new frameworks “aimed squarely at two of the hottest sectors in the Internet of Things (IoT): HealthKit and HomeKit”.   The former facilitates communication with fitness and health apps.  The latter, “uses Siri to poll and control household appliances and systems (heating and cooling, lighting, security (and eventually entertainment?)”

The announcement named some key partners for Apple, including the Mayo clinic and Phillips Lighting.  Light then notes:

What is missing from this announcement is any mention of how health insurers or homeowners insurers could participate in what Apple wants to be a foundational step for connecting networked sensors to data stores, and then using analyses of that data to better price, underwrite, and control losses.

After noting how effectively smart phones are changing aspects of insurance, Light notes that Apple is positioning itself to do the same with the Internet of Things.

Light then poses the money question: “Will insurers jump on this wave—or stay on the beach?”

That analytics engine seems to have some capacity…

This is where we need your help.

If you are an insurer and you have just invested multiple millions of dollars to  have advanced  analytics capacity (hardware, software, and grey-matterware), does it make sense to use it just for one line of business?  Or would you think that maybe what’s good for the auto-goose, might be good for the property-gander?

And if you write commercial lines as well, would you keep the the analytics capability tucked into a personal lines envelope?

What do you think?

 

 

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