“Traditional” insurance programs generate the vast majority of P&C insurance revenue, profit, and resources. And major insurers continue to buy and update core systems to improve functionality and manage “main street” insurance programs. However, new digital tools are changing methods and roles. Can these two approaches come to fully support the digital future?
Smart Homes …
… are all the rage. New or renovated homes are increasingly incorporating digital tools to improve the quality of the home and its value.
Data from Statista indicate that household technology penetration is 25.3% now. Revenue from North America smart home devices will be US$20,996m in 2018.
Insurers are keeping up with new “twists.” For example, losses from underground piping, overland water, etc., have not been included in the insurance policy, but coverage is becoming available from some insurers.
Moreover, insurers – Aviva, for example – are offering tools to reduce claims, including:
- fire alarm systems;
- fire suppression systems;
- security systems;
- sump pumps;
- automatic water shut-off devices;
- lightning suppression systems;
- back-up power systems;
- hail-resistant roofing materials.
Significantly, Statistica projects that household technology penetration is projected to grow to 43.4% by 2022, representing an annual growth rate of 15.6%. Revenue will increase to US$37,534m.
This sounds like a more than a critical mass.
Homeowners could also invest in other monitoring and command tools.
The bottom line is that “home” will be much more than four walls and a roof. Increased digital tools and third party monitors will offer additional value-added products.
Don’t forget the car
We’ve been following “smart” vehicles since 2013. Interestingly, they are right on time: semi-autonomous vehicles are on the road now, and autonomous vehicles are just a few years away.
According to Jeff Goldberg, Senior Vice President of Research and Consulting at Novarica, half of the insurers who have deployed telematics programs say the value of telematics is unclear from an actuarial or underwriting perspectives.
However, Goldberg posits that:
Thinking beyond service packages, telematics programs like driver improvement initiatives give insurers the opportunity to realign their relationships with policyholders; carriers can position themselves as entities who care about their insureds’ well-being and invest in their safety and self-improvement …
Technology: Going ‘Outside-In’
Since the early 1970s, a high percentage of insurers have relied on externally developed systems to manage underwriting, claims, markets, payments, distribution, and information intelligence. There have been focused services (actuarial, mapping, etc.) that sit along side core systems, usually without much integration with the core systems.
The InsurTech movement developed tools quickly to address new opportunities (e.g. geo tracking for automobiles) or radically changed existing functionality (e.g., underwriting rules).
Basic rules’ Integration with the existing core systems was a low secondary requirement, if any requirement at all. E.g., fixed coverage durations (six months, one year) were left on the side of the road as the InsurTech introduced ‘microservices’.
We are now seeing some of the large core system providers (e.g., Guidewire, Majesco) working with the start-ups and, in some cases, acting as VCs.
My best guess is that the successful InsurTechs will be absorbed by larger entities or stay external, but with strategic agreements.
“Guess” is the operative word.
Let’s Get Together…
Insurance-Canada.ca, Inc. will be hosting the 2nd annual InsurTechTO on November 7 at the Toronto Sheraton Centre. We will be looking forward into the future as well as examining the present.
In addition to a great Keynote speaker (Sharon Ludlow, Executive in Residence, Global Risk Institute), InsurTechTO will feature expert digital analysts (Jim Klotz, Novarica; Mike Fitzgerald, Celent), InsurTechs (David Kelly, BobTrak; Philippe Lafreniere, Slice Labs) insurers, MGAs, brokers, and more … many more!
Plus an InsurTech Pitch competition, led by InsurTech innovator and influencer extraordinaire Andrew Lo.
See you there!