The future of underwriting and pricing
Big data is out of date because we are entering the world of data. This one is present everywhere! The creation of data will be multiplied by 10 between 2016 and 2018. The interactions with smartphones are exponential, and the creation of data by the companies is gigantic. All this data can now make sense by their analysis, and it’s a good thing for insurers! Indeed, data is the raw material of their profession.
The solutions of selfie analysis , DNA or mobile phone data already exist, it’s not science fiction! According to an Accenture study, making good use of these data to measure risks, prevent them in real time, and improve sales through segmentation could improve the combined ratio from 16 to 21 points! ( Note: I did not control this figure in the “Harness the data exhaust stream” study, but it seems very high, although I agree with the principle ).
10% of the insurers (early adopters) already use the data of GPS tracking of smartphones, data from social networks or the history of navigation! This trend is likely to evolve very strongly in the next 10 years.
Connected home technologies already exist, with all the interest that this can represent in terms of risk prevention. First, it concerns fire detections and intrusions.
On the other hand, market penetration is still low, mainly for reasons of cost and interest. However, the market currently seems to be reaching a tipping point. The arrival of Amazon Echo, Google Home connect and other home-connected assistants are paving the way for connected homes, “smart homes”.
By 2022, more than half of the respondents plan to use data from various sensors in the home, which represents an upheaval compared to the 3% of telemonitoring deployed today!
The vehicles also become connected and therefore produce data. Connected assistants complete the traditional GPS. Thus, it becomes possible for drivers to adapt the driving experience to the outside environment, and to better manage their time in the vehicle.
The prospects, again, are excellent: Only 8% today use data from vehicles, while they will be close to 80% in 10 years. ( Note: within 10 years, the arrival of autonomous vehicles should cross with this data </em>).
Drones are also increasing noticeably, specifically for disaster recovery (7% today versus 47% in 5 years.
Proximity and customization
Wearables, portable connected objects, such as watches or bracelets, can be considered by insurers at any time: sleep, alcohol consumption, communication behavior by texting … Products already exist: John Hancock in the US, offer 15% discount to policyholders who agree to share their Fitbit data.
Half of the respondents indicated that they would consider using this data within 5 years. However, this is only a start, as data could soon be generated by sensors inside the body! In addition, genetic tests could be generalized. ( Note: The Anglo-Saxon market is more liberal than France on these issues, but is often a harbinger of the prospects, and we are getting closer to what we could see in 1997 in Bienvenu in Gattaca … )
A new pricing model
Data does not only allow insurers to track their risks and launch prevention policies. They can also be used to adjust pricing in real time to offer customized offers in a transparent and competitive way.
This type of operation already exists but is expected to develop in the coming years, especially on auto insurance.
In addition, 96% of insurers believe that dynamic pricing could help change behavior and thus reduce risks. 85% think this will improve loyalty by creating more frequent contact points. (N ote: Personally, I do not believe in this point of view, because it is solely oriented insurer, not customer. Ecosystems, responding to the need, and thus more” customer-centric”, could have far more impacts ).
Pay as you go
90% of respondents believe that insurance has the purpose of developing in the years to come. It would fight against a price policy often considered opaque.
Here are some figures by market segment.
The future of insurance 2017
Pricing will not only be dynamic and transparent. Machine-to-machine communications should soon be able to automatically find the best coverage and the best rate for our needs. 85% estimate that in the next 10 years, it will be common to use automation between sensors, a blockchain system and automatic claims declarations to structure the insurance contracts. ( Note: one wonders then what will be the role of the insurer! My theory of the decomposition of the value chain is not far! )
In addition, a new model is being considered by many respondents. Many believe that insurance could be automatically re-run automatically by comparators of a new kind that, thanks to artificial intelligence, would find the best option for a contract or a portfolio. ( Note: Guillaume Rovere would surely be extremely interested in this concept! )
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