Insurtech innovations to follow in 2019

Peter Bretton Blog

Insurtech innovations to follow in 2019

As we turn the corner on 2018, we look ahead to expectations for insurtech in 2019. What are the key areas to keep an eye on? The impact of the Internet of Things (IoT) and actionable big data continues to drive paradigm shifts across the industry. The transformational nature of these technologies is being applied across the insurance customer journey to increase customer engagement, reduce costs, and meet the shifting expectations of the millennial consumer.

Data and Tech

Data leads the charge

Accenture’s Technology Vision for Insurance 2018 survey found that 82 percent of the 623 insurance executives agreed that their organizations must innovate at an increasingly rapid pace just to maintain a competitive edge. Gartner recently reported that data and analytics continues to be the most commonly mentioned game-changing technology among insurance CIOs. Clearly, collecting data on policyholders and their behaviors will continue to be a top priority for insurance CIOs in 2019.

As the cost of collecting IoT data falls, insurers will have the ability to collect more data about more activities. The falling cost combined with wide availability of IoT sensors has led to a proliferation of insurance telematics data collection providers. Lower technology cost is welcome news for the insurer and is pushing their providers to innovate beyond data collection.

Beyond data gathering

The insurance industry is now facing a new challenge – once you get the data, what do you do with it?

Innovative insurtechs have seen the commoditization of the IoT sensor market and have moved into providing analytics and services that leverage data and make it actionable. 2019 will be the year insurance carriers move beyond data collection to making data actionable through analytics.

Insurers have been using policyholder driving behavior to price premiums in a very limited way for the past decade: a small discount for sharing telematics data. Insurers have not had enough data (or the right data) to accurately price risk based on driving behavior.

They have been focused on data collection – offering a small discount for drivers to share their data. With more advanced predictive models, like Octo’s DriveAbility Score, insurers have the tools they need to advance beyond proxy-based pricing informed by telematics to create truly individual pricing based primarily on observed driving risk. Another example of moving beyond data collection to truly actionable insurance IoT data is the use of telematics data to support crash detection, proactive first notice of loss, and claims management. With the right data, algorithms, and tools, insurers can detect accidents and significantly drive down the cost of claims. Our partners have seen a reduction in combined ratio of up to 14% through telematics-driven pricing and claims management.

Industry experts point to smart contracts as an emerging way for insurers to leverage IoT data in an innovative way. Smart contracts allow insurers to incentivize low-risk behavior through premium refunds and rewards. The primary challenge insurers face when leveraging smart contracts has been finding an efficient way to execute these contracts. Using IoT data to understand risk and detect accidents allows the automation of smart contract execution and significantly reduces challenges associated with pricing these contracts.

Applications for telematics broadens

2018 saw real forays into insurance IoT beyond auto for the first time. Telematics programs, such as Roost’s partnerships with major home insurers and wearable-based life insurance telematics programs such as John Hancock’s will act as a catalyst for new connected offerings in 2019. Insurers must recognize, though, that connected insurance, in-and-of-itself, is not a strategy. They need to find the best way to leverage connected insurance to improve their bottom line.

Property & Casualty, Life and Health

The vision for connected products in home, health, and life has existed for years but we are now seeing the execution as consumers appreciate the benefits of collecting information about their homes and even bodies, as it does for their cars. As a result, insurers are making unprecedented moves in these areas.

Telematics data can provide a better quality of life in our homes and offices as it now does our cars. Our homes are changing radically through smart automation and the introduction of value-added services. We can monitor and control our homes remotely. We can control the thermostat and appliances. We can detect hazards such as fires, flooding, break-ins or gas leaks, and instantly alert emergency services through the push of a button. According to Berg Insight, by 2020, 28% of homes will become part of the IoT.

Likewise, consumers who opt in to active health monitoring and live a healthy lifestyle will also reap rewards. Just as good drivers are rewarded, using wearables or – as we do with vehicles and homes – using sensors to proactively monitor and report health status, will result in not only earlier detection of issues, but improved medical care and possibly special premiums from insurance companies.

Consumers have similarly gone all-in on sensor-driven health through health-monitoring wearables, smart water bottles, posture tracking sensors, and sleep trackers. Over 100 million wearable devices alone were shipped in 2016. These personal telematics devices generate massive amounts of data on overall health and health-related behaviors that could be valuable to insurers. Insurers need to find a way to make this vast amount of rich data actionable for pricing, claim management, and customer engagement.

We are already seeing the first phase of this as insurers consider incentives for policyholders who use fitness trackers such as a Fitbit or Apple Watch. John Hancock, one of the oldest and largest North American life insurers, announced in 2018 that they would stop underwriting traditional life insurance and instead sell only interactive policies that track fitness and health data through wearable devices and smartphones.

Consumers drive the change

Consumer expectations, especially those of millennials, will continue to set the agenda for insurers. Consumers expect a frictionless customer experience, real-time mobile access, and greater transparency. While IoT adoption is not a challenge, as evidenced by the 400 million plus connected devices worldwide, insurers must find the right way to access and use this data. Auto insurance telematics has proven the value of IoT data for risk pricing, claims management, and customer engagement, but auto telematics is just a small piece of the insurance pie.

IoT and telematics is not a matter of ‘if’. Our lives are growing more connected by the year. Consumers, especially millennials, not only see the value of an integrated and connected experience, they demand it. Insurer competitiveness is predicated on their ability to quickly and effectively use advances such as IoT and telematics. The challenge for the insurer will be to determine the most profitable use cases for their client base and business goals.

As the adoption of telematics increases, insurers will find that their greatest challenge is managing their growing portfolio of connected products on a one-off basis. Point solutions for individual lines of business in insurance can cause data silos and logistics inefficiencies as each business line explores IoT separately. Tapping into IoT data streams that consumers are adopting for non-insurance purposes will also be both critical and challenging. Insurers need more than a commercial or personal auto telematics solution – they need an insurance IoT platform to efficiently and seamlessly manage all of their connected products within auto and beyond.

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