Forbes insights publishes a small report on the use of geographic data in insurance that challenges the saying “close enough is good enough” and say that from now on, the GPS approximation is not enough anymore! Continue reading “Forbes insights – Close enough is not good enough”
Insurance Innovators (an offshoot of Market Force, which I had already talked about here for their report under the same title ) has just published the future of insurance 2017 (Future of General Insurance Report 2017).
7 themes are discussed (for a better readability I separated into several pages):
- Innovation and Disruption
- A changing regulatory environment
- The future of underwriting and pricing
- Value-added services
- Touch Millenial Generation
- Insurance in the Age of Machine Intelligence
- Fraud in a connected world.
Written in partnership with the Chartered Insurance Institute , and sponsored by IBM, Sas and Smart Communications , this report is generic, but of quality. Market Force believes that insurers are poised to innovate and transform to keep pace with insurance companies, but the pace of transformation is still too slow. A tip: Act now! Continue reading “Insurance innovators – Future of insurance 2017”
Lexis Nexis published this summer a white paper on the best practices for predictive modelling , or more precisely on the steps to follow to implement this type of solutions for small commercial.
According to them, 4 steps are necessary for a product creation of this type:
- Design and development
So far nothing transcendent, isn’t it? Let’s check it out!
Successful ideation assumes that two conditions are met: a strong sponsorship and a cross-functional team.
The responsibilities of this team are as follows:
- Identify and validate the business problems to solve
- Generate ideas on how to solve these issues with predictive models
- Select the best ideas
- Highlight the benefits of predictive models
- Calculate implementation costs
- Determine the ROI and justify the use of predictive models in relation to another solution
- Establish acceptance of the topic among the teams.
Design and development
The report is focused on contracts / products for small businesses. The suggestion is then to go through an “insurance score” to analyze and estimate the risk and to price it, according to a probability of losses.
3 steps are needed:
- Data mining : nature of data, sources, refresh frequency, etc. For example, it is possible to use historical loss experience data ( Note: obviously …! ), but also credit data, or public data about the company. In a more detailed way, the geographical location is relevant. ( Note: at this point, note that we do not use anything complex! )
- Model creation and validation : This is to determine, on the basis of a set of data, patterns or correlations that recur. We are here in deductive mode, we start from data to deduce a model. The challenge is to identify which data plays a role in achieving the desired goal . Then, it is possible to test the identifier models on data and production processes, to ensure that, when capturing the data, it is possible to categorize a new customer using the defined models.
- Here is the kind of report that can be generated to define a number of groups to automate the subscription with 3 possible actions: acceptance (right), visa application (center) or automatic refusal (for worst groups).
- Regulatory review : This aspect specific to the American market (but finally quite close to the regulatory aspects valid everywhere), suggests to compare the required data with the specificities of each state, and to apply, where applicable, restrictions.
The implementation is based on a few key steps
Finally, monitoring the relevance of the model assumes, on the one hand, to track the use that is made of this product, but also to measure its effectiveness.
Finally, monitoring the relevance of the model assumes, on the one hand, to track the use that is made of this product, but also to measure its effectiveness.
Tracking : Scores must be tracked when applied and when modified before application. In these latter cases, it is important to understand why and possibly modify the model iteratively to improve it.
Efficiency : The most important thing is to make sure in the long run that the model is good for achieving the business objectives that were originally defined. If this is not the case, it must either recalibrate (keep the mechanisms, but readjust the valuations), or rebuild it!
Small bonus on best practices for predictive modelling
Moreover, on this subject and always by Lexis Nexis, I invite you to consult this video, which includes some of the fundamentals:
SwissRe has just published its global insurance review 2017 and its 2018 forecasts. The document is available at this link (Global insurance review) .
Innovation is essential, but to identify new answers, I remain convinced that we need to understand the state of the current market. This type of report is therefore essential to refine the grid of reading of what is happening in the world around us! This is particularly right as they give valuable insights into innovative solutions!
The four main themes covered in this document are:
- Continued cyclical economic recovery at the macroeconomic level, although risks of instability persist;
- Obviously, a big subject on the natural disasters of the year! These are causing great difficulties for all the systemic insurers in the area and therefore even more so for reinsurers;
- Life insurance re-insurers adapt to the new deal;
- Stable emerging markets in non-life and strong growth in life.
Key Points from the 2017 Global Insurance Review
More globally, here are the 10 points that SwissRe puts forward:
- The rise of protectionism in large markets: in the United States, but also Brexit or the situation in Catalonia. This phenomenon is however not uniform (for example Latin America is liberalizing)
- Monetary policy : what about the gradual end of quantitative easing?
- Cyber risk : The market is growing rapidly, and the stakes are high, particularly in terms of the quantity and quality of data needed for risk monitoring and pricing. A particular focus is to read p15 of the doc on this subject. Indeed, an estimated growth of 30% per annum of this market over the next 5 years should not be underestimated.
- Increasing auto claims : More and more miles traveled, more traffic and distracted driving are the first drivers. The key is always technical results.
- Brexit and the UK insurance market: Depending on the UK exit format, premiums should be reduced by 8 to 20%. This is a considerable shock on the market.
- Innovate to increase the scope of insurability, especially in the “commercial” segments: I come back to this point just after
- Losses related to Natural disasters (hurricanes).
- Protecting Floods : Tools now exist to assess flood risk, and collaboration with states is needed to ensure the best coverage of this risk.
- IFRS17 : Investments will be needed around the data to ensure good data collection and analysis.
- Insurtechs in China : I’ll come back to this point below.
On the perimeter of the “commercial” contracts (on which I am working rather seriously lately), innovation brings new solutions.
Swiss Re cites, of course, parametric insurance solutions, coupled with a global vision of risk, that solve complexities of the process at the time of the claims. On the other hand, it does not bring any real additional value talking about premium reduction for example.
The most important point about these contracts is that it is now possible to insure elements previously impossible to cover. This offers interesting growth opportunities. For example: image loss, product recalls, weather protection, or financial risks of increasing energy prices. This is now possible thanks to better access to risk data and a better assessment of its consequences.
Insurance can therefore strengthen its position as a protector of corporate investments and offset the risks of earnings volatility.
Insurtechs in China
A small recap is proposed on the issue of insurtech in China, where the growth of Zhong An is particularly impressive (insurtech largest insurer of the world).
2 successive waves took place in China:
- A first from 2001, around the online distribution, which brought the online market share to almost 8%;
- The second in recent years, which exploits new technologies and especially big data (telematics or insurance to use / UBI)
Prospects can still open up to cover the ecosystem of e-commerce, and even consider the entry of new players outside the insurance world.
The Chinese regulator seeks to constrain certain segments (such as online lending), but it is generally rather a support for innovation.
My opinion on the global insurance review 2017
Always of very good quality, the Swiss Re reports are full of information and figures. One could blame them for their lack of pedagogy and the austere aspect of their reports, which prevent a diffusion to the greatest number. It may be the price of quality!
Accenture publishes its last report dedicated to the transformation of insurance distribution . The ambition is Reimagining insurance distribution. The latest version of this report was from early 2016.
Digitization transforms insurance distribution
The report is based on a survey of 400 industry managers around the world. The first lesson is that the vast majority of actors are working or planning to work on a restructuration of the distribution model, including by leveraging the benefits of digital. Only 1 in 5 actors do not think about it.
Accenture brings out six trends:
- Digital channels
- User experiences improved by customer knowledge
- Changing the role of the agent
- Future of aggregators
- The role of ecosystems
- The Internet of Things.
Besides, Accenture gives insights on what they call the “living services”, all the services that the insurer can provide in addition to its customers based upon collected data in particular.
1. Digital channels
All stages of the distribution chain are affected by digitization and a search for omnichannel. Thus, this trend does not question traditional networks, but questions what should be the respective place and added value of each. Accenture also confirms the rise of selfcare, which has two objectives: satisfaction of customer demand and a desire to reduce distribution costs.
2. Customizing the customer experience
Insurers are clearly switching from a” product-oriented” posture to a” customer-oriented” one. ( Note: By the way, it will be necessary for Accenture to explain the difference between the concept of sales of products based on the needs and the notion of customer-oriented model, because I am not sure to understand… ).
This involves mastering the collection and use of data for:
- To estimate correctly the potential of each one
- Choosing the right channel for each customer
- Identify the best time to initiate a contact
- Choose the best offers and the right messages.
This involves the use of predictive models to adapt to a changing population.
3. Changing the role of the agent
Almost 2/3 of insurers work with their agents to ensure the best positioning in the value chain. It is about bringing them in when their added value is the most important. Another essential element with these populations, 79% of insurers rework the models of remuneration in a digital and omni-channel context.
Thus, the remuneration should aim to encourage a certain number of activities, around the customer relationship.
Finally, this type of questioning brings another trend, heavier and longer term. This involves reviewing the profiles sought for new recruits. ( Note: a legend in Figure 8 would not have been a luxury to ensure understanding … )
4. Future of aggregators
The aggregators confirm a dominant position and still growing. Respondents believe that they will be even more used, especially in the upstream phases of the distribution (search for information or tariff).
Therefore, the question is to choose the strategy to adopt against these actors: use the brand to generate commitment or use a dedicated brand or sell white label. The answer is very variable according to the geography and the penetration rates of the comparators. There is therefore no single answer. On the other hand, we still see a tendency to favor the use of a secondary brand for these channels. ( Note: One nuance, it does not seem relevant to me to treat in the same way the respondents who say they may be ready to do it within 3 years, and those who do not know. It affects seriously the result).
Finally, last step observed, the creation of proprietary aggregators. ( Note: I do not dwell on this point, too few details are given by the report on what is understood in this terminology, it is too vague to be exploitable! )
5. Ecosystems: end-to-end experiences
One point on which I agree with the conclusions of the report: the future of insurance goes beyond insurance. It is the emergence of service ecosystems that aim to improve the response to customer needs by offering new services or products. It’s about building partnerships and thinking more about what can generate engagement.
Note: This point is a really insufficiently treated.
6. The Internet of Things: The New Paradigm
Whereas the focus was previously on the embedded telematics (of which I speak regularly), connected objects now move the lines. In 1 year, investments have exploded and the number of services or associated products has been multiplied by 2 or 3. It affects all types, including smart homes, health or other wearables.
This allows a change of posture, from the role of indemnifier to the role of prevention, more positive. In addition, insurers can now offer their clients self-assessment of their risk, thanks to tools whose prices have fallen significantly.
Digital leaders show the way
Accenture reveals a difference between digital leaders on one side and followers on the other. Where the former seek to truly transform their profession, the latter are more willing to catch up.
By comparing the relative positions of each one, it makes it possible to better appreciate the differences between the most advanced actors and the others.
On the question of connected objects, we can also better measure the difference in taking into account the problem.
A recommendation: become a digital insurer
Accenture’s recommendations focus on four areas:
- Choose your business and distribution models, and stick to them!
- Define the desired position in ecosystems, models of cooperation or partnerships (yes!)
- Switch from a compensation mode to real-time protection
- Make innovation and customer focus the cornerstones of distribution strategies
- Seeking simplicity first and foremost for access, transactions or offers
- Emphasize the human contact of agents on advice, value-added and more complex customer relationships.
Conclusion of Reimagining insurance distribution: Transforming to Secure the Future
Conform to the standards of all reports of this kind, Accenture does not know how to close a report! To write:” The only thing we are sure of is that the insurance company of tomorrow will be different from today’s” is of an appalling banality …
In short, since the results are based on studies and surveys, it provides a confirmation / disregard of a number of concepts. In this sense, this report brings real interesting points. However, being too hand-to-mouth, swallowing the analysis and for all that depriving oneself of carrying convictions is very disappointing for this type of player on the market. If Accenture hopes reimagining insurance distribution will be that simple, they’re wrong: it will take a little more.
Deloitte published in November 2016 a European study on car insurance entitled The growth of connected cars insurance. This study is carried out for the second year in a row on approximately 15,000 consumers and in 11 European countries (Austria, Belgium, France, Germany, Ireland, Italy, Poland, the Netherlands, Spain, Switzerland and the United Kingdom) .
Briefly, Deloitte believes that these products are promising, that customers are ready, and that it remains to work the business model by moving towards services. One of the main elements to remember is the notion of service platform, presented at the end of the study .
Current situation of the European market
Deloitte presents the figure of 97 billion euros for the size of the European market (premiums issued) of motor insurance in 2015. They also present a potential of connected cars insurance by 2020.
Three lessons are to be remembered:
- Overall, the potential is 17% (or € 15bn) of connected cars insurance, with two countries far ahead: Italy (see Swiss Re case study on this topic ) and to a lesser extent the UK. These two countries have a potential of respectively 27 and 23% of their market. Note, in Italy, there are already 4.5m insurance policies concerned.
- The study shows a significant change between 2015 and 2016: the intention to change insurer increases more than 15% in Europe. For the authors, this indicates a transition towards a more volatile market, and therefore a necessary transformation. (Note: In France, we observe it through the consequences of the law “Hamon”)
- 28% of respondents are willing to share their data with their insurer. At the extremes, France and Germany were the most cautious (27% and 25%), and Belgium, the most interested (40%).
Short summary sheets are presented by country and make it possible to explain specific local situations.
While insurers do not always have good press, customers are nevertheless rather ready to share their data with them. Insurers have a relatively better image than many other types of actors.
In an increasingly standardized, competitive and fluid market, this shows the appearance of a momentum for insurers. It could be interesting for them to exploit these good conditions to position themselves in this market and thus set up criteria differentiating from their competitors.
Nevertheless, it’s impossible to talk about connected cars insurance without talking about analyzing and processing the data collected. It is therefore a question of organizing the transition to more big data in order to benefit from real targeting skills.
Which potential customers?
6 categories of customers are identified by the study, with a very different interest towards connected insurance contracts:
- Segment of curious elderly policyholders
- Faithful elderly
- Refractory aged insured categories
- Versatile young people insured
- Young faithful insured
- High-Premium Insureds
If these categories deserve a little refinement, they already allow the authors of the study to make an international comparison.
What motivations for underwriting connected cars insurance?
Several scenarios were proposed to the respondents.
Consumers appear much more likely to share their driving data than data from social networks. In addition, as expected, price reduction is the main motivation that can encourage sharing of information. On the other hand, the provision of complementary services is well reflected in the expectations of customers.
The study then presents two interesting visions showing the correlation in the valuation of services and the confidentiality of data, first by country, then by population segment.
We will note here different profiles for the two most advanced countries (Italy and United Kingdom).
Is connected automobile insurance, in addition to an opportunity for differentiation in the market, the opportunity to renew or develop the service offer. This is what the authors of the study think.
Categories of Services
3 categories of services were studied:
- Automotive related services : troubleshooting assistance, theft notification, etc.
- Non-automotive services : geolocated promotional offer, etc.
- Data analysis and driving behavior services : Travel and expense information, comparing driving with friends, etc.
Respondents then had to indicate whether they would agree to share their data in order to benefit from one of the 17 services offered.
4 services are therefore clearly of significant interest (more than half of the respondents would be willing to share their data):
- free troubleshooting assistance
- automatic assistance in case of emergency
- theft notification / tracking of stolen vehicles
- free oil change or vehicle maintenance services
These services (in relation to the automobile) could then serve as levers for insurers in order to gain maturity on the other 2 categories of services.
Case / smartphone application
Finally, the study shows a preference in almost all countries for a box installed in the vehicle rather than a smartphone application. A nuance is to be brought: the versatile young insureds show a rather opposite behavior (54% of preference for the application). As it is in this segment that there is a strong potential for development, this nuance is important!
As the choice of equipment is fairly structuring, insurers will have to choose the segments of the population they want to target as a prerequisite for any approach.
The usual worries of the insured are not excluded from this study.
The issue of transparency in the use of data is therefore essential. In addition, three approaches are to be taken into account by insurers to integrate social responsibility issues:
- ethical dimension of data usage
- possibility to feed a new type of relationship with the insured
- taking into account real risk prevention / loss reduction.
In the end, it should be clear to insurers that the data collected should be used for risk reduction and not just for risk selection. We find clearly in our study that the assessment of services is related to security issues.
The service platform
One of the main elements of this study is the notion of service platform. Insurers have the opportunity to move from a value proposition focused on claims management to a wider range of services around the mobility experience.
Connected cars insurance could be the product that will allow the insurer to renew its relationship with the insured, adding more frequent touch points.
This implies for the insurer to be interested, beyond tariff benefits, in the entire ecosystem of car insurance. More specifically, the insurer will probably have to participate more deeply and invest these new segments to reinvent the user experience.
The choice that presents itself is simple for the insurer:
- Either do nothing and take the risk of being overwhelmed by new players that will spill over into its business segment
- Either position itself as a service platform, which will allow the insured to access an ecosystem of partners.
The experience of a few players in other markets (eBay, Uber, TripAdvisor, etc.) shows the potential of such an economic model. These entities are indeed able to operate light and flexible structures that adapt quickly to the needs of consumers.
Auto insurance is already mature enough, and offers a clear environment. This will surely be one of the first branches for which we will have to reinvent the operational model. The first to launch will have a certain competitive advantage.
Deloitte is presenting a proposal for a range of services that could be addressed.
An example given by Alexandre Lebrun of Facebook at the Insurection event brought up a subject that I wanted to discuss here. This is the need for insurers to start thinking about insurance products redefinition.
The example quoted is the following:
- Alexandre Lebrun consulted the patent plans for the first washing machines.
- It was then a question of proposing a technical tooling which made possible to reproduce by the machine the manual action carried out in the antique laundry
- It was only afterwards that the industry modified the plans to adapt the washing process to what the technology could do more efficiently (the inside rotation that we know nowadays).
Technological change or innovation brings new solutions.
As a first step, it is a question of using the new technology to make more efficient the actions carried out previously. In other words, it is about consuming fewer resources (time, money, people) to achieve the expected objectives. For example, technologies such as RPA open up horizons for automating recurring tasks. So it’s about doing the same thing as before, but doing it better.
Another level of analysis is open with the surge of new solutions coming to the market. Like the washing machine, it becomes necessary to reinvent the insurance business and the way to realize it to adapt to the technical possibilities.
Attention, it is often said in IT projects that we must be careful not to be too influenced by the tools to not constrain the framework of expression of business needs. But the current business teams are themselves often constrained by a historical framework of thought that is not always relevant. Business need is therefore as this watermelon, constrained in its mold.
The arrival of new tools, or new technologies must therefore be a pretext for an opening of borders, the extension of the horizon of possibilities.
Focus on the impact on supply: towards an insurance products redefinition
The assumption expressed above may have impacts in many aspects across the entire insurance value chain or business processes. However, I want to treat it under the axis that seems to me the most striking: the products!
A Standardized Offer Policy
Insurance has always been very product-oriented: a car product, a home product, a health product, an additional health supplement, a borrower insurance, etc.
In each of these products, the offer has become standardized, sometimes subject to regulations, sometimes under the influence of the market which is stabilizing and becoming standardized.
So we see products appear, all very close in terms of covers and exclusions, the comparison is not easy. Although initiatives here and there exist to simplify the terms and conditions, we still see exclusions against the fission of the atomic nucleus or this kind of thing (in French sorry, but the same examples may exist in english):
It is not useful to say who are the insurers concerned, everyone, in his own terms & conditions, can find this kind of fomulation.
First impact of innovation
As we have seen above, innovation aims first and foremost to improve the current way of doing things.
The companies then call on insurtechs considered as “enablers”. These are intended to enable better management by reducing irritants, streamlining processes or improving operations.
Take the example of auto products, and claims management. All insurers have long sought to improve their process.
In that objective, they were able to deploy:
- Process Improvement
- Implementation of dedicated management tools with complete workflows
- Deployment of solutions for teleexpertise
- Opening of selfcare services
At this stage, it is not a question of modifying the products, but of adapting the context that goes around!
2 nd impact of innovation
Where the exercise goes further is that innovation imposes a new way of thinking.
On the claims management, to go further, it was necessary to automate the settlement of claims.
The first option was to speed up all operations, but that was not enough. For some time now, automatic payment solutions have appeared because of modified products. I am thinking here of parametric insurance, for example:
- Weather insurance: if it rains more than a certain number of mm of water over a certain period of time ( as in this SwissRe contract in HongKong ), the conditions are met for an automatic claims settlement.
- Cancellation Insurance / Flight Delay: Several solutions have recently been deployed. If a cancellation is announced, it is possible to adjust the loss automatically.
This involves two new elements:
- A data feed, which is not structured today: Meteo France does not yet allow a systematic provision of forecast information or weather observations, companies or airports do not publish all the time via interfaces / API flight data.
- The structuring conditions of the products must be adapted to these new rules.
Products as they exist today leave too much room for interpretation and therefore require human intermediation to be treated. Who says human, says subjectivity. When we add terms & conditions and very numerous exclusions, we get a lassitude of the customers and the famous phrase: “the insurers are all thieves! “. At this level, there is no question of a lack of security, just an offer that does not voluntarily cover the complexity of the needs of insured, to achieve controlled price levels, on the one hand and profitability, on the other hand.
Policies to cover needs
Thus, three progressive consequences are to be expected from the innovation on the offers of the insurers.
- A simplification of the products,
- An objectification of the products,
- A coverage of needs, rather than standardized products.
Gradually, the general conditions of 30 to 60 pages should tend to disappear. The goal is not only to express the same thing more clearly ( as we saw in Cardif ), but above all to remove the rules that pollute the customer experience. So it’s not so much the writing that has to be simple, but the product. Thus, there should be no question of looking for dressings in technology , but rather make confidence in the insured by a better understanding of what he is obliged to make sure!
Once the simplification is in place, it is a question of objectifying! It must then make the contract dependent on objective rules, supported by recognized third parties or formal findings! At this stage, it will be necessary to consider that a home insurance is activable as soon as a water damage has taken place, and this, whatever the reasons which triggered it (check therefore in your contracts if the overflows are covered ). A borrower insurance will be acquired, as soon as the incapacity is noted, without playing on the terms (check if your contract covers you in case of incapacity to realize “any profession” or “your profession”, just a term which changes a lot things).
In short, it will obviously cost more to cover, but the price will be offset by customer satisfaction and the reduction of churn on the one hand, and the reduction of management costs on the other hand. Moreover, technology now allows the application of anti-fraud controls a posteriori and thus remove doubts on that side.
A last level of maturity appears, via the two previous points, as well as by the new uses that appear on the market. Thus, when you are insured by car, you are insured for you as the driver of your vehicle. What about collaborative uses (you rent your vehicle on Drivy or rent another vehicle).
These needs are now covered by other insurance products. The insurance of tomorrow will surely have to cover “mobility”, and will include all your travel operations. This can be by driving your vehicle or rental vehicle, driving a bike or scooter self-service or by taking the train or plane, etc.
Home insurance will cover tomorrow the need for housing. Thus, there will be both a minimum insurance when you do not occupy places, and full insurance for where you are at the time you are there. With this in mind, Wilov’s proposal for auto insurance is interesting: you are insured all the time and only pay when you drive.
And you, what do you think of this necessary insurance products redefinition ?
PS: For atypical vegetable gardeners, molds for fruits can be found on the CoolGadget website !
Cap Gemini released mid-September, in partnership with Efma , its annual report on insurance:”world insurance report 2017“. This one is based on an international survey (Capgemini’s voice of customer) and this year is interested in 3 aspects:
- Generation Y and its appetite for digital solutions,
- The notion of” Moment of Truth ” (Moment of Truth, the moments that tip a customer’s opinion on his insurance company)
- A growing cooperation between insurance companies and traditional insurers that makes it possible to exploit the strengths of the two types of structures.
Thus, and I’m aligned with this idea, it is not only necessary to invest in innovation, but we must invest properly.
Key elements to remember from Word insurance report 2017
- 1st part
- Digital technology is now at the heart of insurers’ strategy
- Digital is also changing the competitive landscape and, by raising the insurance profile, is driving sector transformation
- Insurers stay ahead thanks to the confidence they inspire
- With their respective strengths, it is the collaboration that takes place between insurers and insurance companies
- 2nd part
- The deployment of new technologies in insurance is transforming processes and bringing value to insurers and policyholders
- Insurers prioritize their investments towards solutions that are easily integrated into their systems and have a potential impact on the entire value chain
- Innovation and digitalization are likely to respond to the triptych Convenience, Agility and Personalization
- For a successful implementation, insurers must invest in a solution portfolio in synergy with each other.
World insurance report 2017 details each of these aspects.
Digital collaboration redefines the insurance industry
The rise of digital insurance
Insurers have gained unparalleled expertise in risk analysis. The current wave of new technologies, focused on customer needs, is forcing insurers to change. Today, younger generations want to have solutions adapted to their way of life. More specifically, CapGemini finds specificities in the expectations of these groups of populations. They formalized them in their study on “Moments of Truth”.
Specifically, CapGemini finds that Generation Y and the group of techies have more marked behaviors, including the loyalty and the likelihood of buying a complementary product.
This confirms the need to find solutions to meet these more demanding expectations.
CapGemini cites the examples of Aviva (driving support app), AllState (claiming with Quick Foto Claim) or Meiji Yasuda Life (strengthening the sales force with smart tablets).
Is digital changing the competitive environment?
Insurance companies can draw new business models, but in a deeper way, they pull the market on a path of breakthrough innovation. Some examples:
- The Everquote comparator offers a preselection of companies based on the profile analysis of the individual;
- Aggregators FinanceFox or Brolly allow to have a 360 ° vision of the policyholders’ contracts;
- BrightHealth to simplify the patient experience by keeping you healthy on the smartphone;
- Trov offers on-demand insurance;
- Finally, Fabric targets young parents to offer life insurance policies.
Everyone (insurers / insurtech) has its specificities and its assets. The diagram below graphically represents the respective advantages of each.
Collaboration as a method of evolution
Competition has long been the norm between insurers and insurance companies, but the notion of collaboration is becoming more and more popular to make the most of the strengths. The following diagram shows these forces. Knowing them well helps to ensure that we make the most of them.
Different methods of collaboration are envisaged:
- Investment / Equity stake;
- Strategic partnerships: in terms of distribution and the construction of offers, for example;
- Incubators: Kamet’s example for Axa invites external companies to help them in their development;
- Internal Incubators: When internal teams have good ideas, you need to be able to grow them out of the usual constraints;
Among these models, it turns out that pure collaboration is still the one put forward by most actors.
The priority for traditional insurers should be to stimulate a culture of innovation and to have a” digital first” approach. Collaboration with insurance companies is one of the keys to this success.
3 themes appear as levers of” Moments of Truth”:
Browse the enigma of innovation
The capabilities of insurance companies open up new opportunities for insurers
From a customer point of view, the solutions offered by insurtechs revolutionize the historical face-to-face relationship through:
- B2C aggregators: These are the comparators, like Insurify
- B2B aggregators: Proposals for tailored solutions for business customers
- P2P Intermediaries: Collaborative Solutions
- Mobile apps and chatbots
Emerging technologies act as catalysts for insurance companies
The technologies cited as examples on the back-office side are:
Then, others, more visible to the client, and therefore front-office side:
- Robo Advisor
- Wearables : portable connected objects (mostly health-oriented)
- Ecosystems connected
Note: CapGemini does not take too much risk here because they quote almost all the technologies that make the headlines of the moment!
Set priorities for the future
In order to select priorities for future development, World Insurance Report 2017 suggests meeting the 3 essential needs of the insured: Convenience, Agility, Personalization.
To do this, CapGemini proposes 3 pillars, visible on the diagram below:
- Digitization, to look for improvements in the cost structure;
- Data & analytics, to look for a better customer engagement;
- Insurance as-a-utility to find new sources of income.
What digitalization solutions?
The recommended solutions are:
- Connected objects : for example, Oscar for health that tracks your physical activity levels, or Hippo for the home that tracks leaks before they cause damage;
- Key process automation : Lemonade robots by example are dreadfully effective, or the use of drones to resolve claims more quickly in natural disasters;
- Smart contracts with the blockchain : Examples of Dynamis and SafeShare Global are included as examples.
- Mobile solutions : Focusing on mobile-only solutions may be relevant, as proposed Wrisk .
- APIs open to develop new applications : This allows you to benefit from the creativity of the mass of developers on the market. The report only cites MuHu .
What solutions around data and analytics?
The recommended solutions are:
- Build individualized profiles : Amodo or Mydrive solutions
- Individual Risk Assessment / Risk Management : Cigna or GOQii allow to target the technophiles for example.
- Pricing Analytics : Sentiance and its partnership with Insurtech RISK is quoted.
- Identifying Emerging Risks : Praedicat analyzes millions of pages of scientific studies to identify new risks.
- Targeted products and services : For example Y-Risk
- Customer service augmented by artificial intelligence : Chatbots of course, but also offers solutions such as Next Insurance or Xtra Axa chatbot .
What solutions for insurance as-a-Utility?
The recommended solutions are:
- Collaborative Insurance : for example, the now well-known Friendsurance
- Multi-risk policies : The solution proposed by Aioi Nissay Dowa Insurance Europe meets this criterion;
- On Demand Insurance : Slice Labs of course and also Sure provide interesting solutions;
- Usage-Based Insurance (UBI) Metromile or Progressive among others offer Pay-As-You-Drive or other derived from the genus.
- Micro Insurance : BIMA or Star Microinsurance ;
- Flexible Coverage : This is the principle of the wholesale broker, for example Bought by many or GEICO ;
How to move forward?
All actors have priorities that vary from year to year and according to their level of advancement. On the other hand, all are confronted with an identical context and the search for new business models is important. For this, it is about being able to choose which solutions to put forward.
The following diagram presents, for each model that an insurer could consider, the functionalities or solutions on which it is relevant to invest.
So we see that one solution can not meet all needs. Therefore, we must invest in a reasoned and coherent way in a set of solutions that create synergies between them. ( Note: Nothing new, the popular saying says well:” Do not put all your eggs in one basket”! ).
Conclusions on world insurance report 2017
The report World insurance report 2017 sometimes appears as a catalog at the forefront of all that the insurance innovation market has solutions, without any opinion, and we can regret it. However, you have to keep 2 things:
- It has the merit, in this catalog, of being quite exhaustive, and little is missing on the call
- There are many examples to illustrate ideas and to form one’s own opinion.
In short, they succeed their exercise at will educational, but do not go further!
Olivier Ezratty shot again! After a guide to startups and a report on the CES in Las Vegas, he publishes a very interesting document around the use cases for artificial intelligence! Continue reading “Olivier Ezratty – Use cases for Artificial intelligence”
On Monday, November 6th, 2017, April Group organized the event Insurection, wanted as the biggest French event dedicated to insurtechs. 300 people attended, and as part of our insurance innovation activities, I was there to represent Siltea .
Back to this day, with the key elements to remember: roundtables and startups present. Continue reading “Insurection by Group April: debrief”