In a 1989 speech to brokers, a bank executive offered an analogy to explain changes he saw to distribution: “If you see a bulldozer paving a road, heading towards you, you need to decide fairly quickly, ‘Do I want to be part of the bulldozer, or be part of the road?’” Twenty-five years later, a technology executive could say the same, referring to automobile insurance.
I love the smell of asphalt in the morning…
At the 2015 Insurance-Canada.ca Executive Forum, CGI’s Scott Bielby led a panel which focused on the “componentization of insurance.” I introduced the panel – consisting of Scott, Celent’s Mike Fitzgerald, and Jamie MacDougall from Gore Mutual – by saying, “I’m not sure what the title means, but we’re all about to find out.”
The panelists did a good job of laying out the framework, and provided me a new perspective on segments of our industry. Since then, I have been seeing parts coming into place, and the bulldozer doesn’t seem that far away.
Networks and platforms trump computers and software
Bielby started his presentation, quoting web pioneer Marc Andreessen, who said “Software is eating the world.” Bielby suggested that, with the realization of ubiquitous connectivity and emergence of Everything as a Service, the quote should be modified to read “Networks are eating the world.”
The point is that platforms – combinations of technologies which allow ease of access to a variety of data and services – are emerging as the critical component for new business models. At the extreme, we won’t worry about choosing and configuring the right software, hardware, and applications. Rather, we will use platform suppliers which will do all of the configuring, and modifying, based on our personal needs.
Smart platform for the connected car
Software developer SAP recently announced a new platform – The SAP Vehicles Network (SVN). In a release, SAP says that this cloud-based solution offers companies “secure, convenient end-to-end vehicle- and mobility-centric services independent of devices or vehicles.” With Samsung as a partner, the SVN will “enable transactions, for example by activating a gas pump and executing payment through a mobile wallet or app, or reserving and paying for parking.”
… and for connected insurance programs
And this will extend to insurance. Working with Waterloo based Intelligent Mechatronic Systems (IMS), the SVN will provide connectivity to support telematics and usage-based insurance (UBI) connections with insurers. According to Dr. Ben Miners, IMS’ VP of Innovation, “Being inter-operable with multiple technologies and best-in-class partners allows us to focus on delivering high quality services”
Telematics/UBI has been going on for some time already. So what’s new?
Simply this: The technology and the connectivity required for the insurer is part of the SVN, making the insurance connection a component of the platform. The insurance billing could be accommodated through the platform as well.
What could that mean? Here’s an example. If you add or replace a car, requesting a change in your policy could be an automatic function handled by the platform when you register the vehicle on the platform. Any change in premium would be could be simply blended into the platform fees.
But that might just be the start….
Assuming that you have elected to have the platform monitor your driving behaviour and retain the information, you could instruct the platform to shop the markets on renewal. The bid and ask process would occur with other insurers and you would be given the option of switching on renewal. Or earlier, if the short rate cancellation was under a threshold.
Or you could simply tell the platform to make the changes automatically.
Holy commodity, Batman! What’s the end game?
Taking this to a logical conclusion, assuming the platform had a robust market of insurers, insurance would simply become a standard service ffered by the platform. You might not know which insurer was on risk with your car at any point in time.
Heresy you say? How different is this from rental car coverage through credit cards?
What’s the probability?
This is a scenario, not a road map. There are lots of moving parts and external pressures the could take mobility and insurance into different directions.
One thing is clear: in any likely scenario, insurance will be a significant component; But not so significant that it could change the course of the platform bulldozer.