The North American Connected Insurance Observatory · Auto telematics is the most mature use case...

May 25th 2017

The North AmericanConnected Insurance Observatory

Matteo CarboneFounder and Director, Connected Insurance Observatory

@mcins_

2

About me

Matteo CarboneFounder and Director of the Connected Insurance Observatory

+11 years strategic consulting (former Principal with Bain & co.)

Keynote speaker and writer on insurance innovation

Global InsurTech Influencer (1° InsurTech Influencer by InsurtechNews, Top 5 InsTech Influencer by InstechLondon, Top 3 InsurTech Influencer by Right Relevance; Top 5 IoT Influencer by Postscapes, Top 25 Disruptors in the Insurance Industry by Vertafore)

• The Insurance think tank started in Europe on 2016 aggregating almost 30 international insurance groups, institutions and tech firm

• The initiative delivers three concrete outcomes:‒ the most pragmatic multiclient research

specialized on the insurance IoT domain‒ one-to-one workshops dedicated to each

member to discuss the research outcomes‒ plenary symposiums with all the members

together around the same table

3

I have recently contributed to relevant papers on the new connected insurance paradigm

4

Connected Insurance is about connecting an insurer with its clients and their risks

The Insurance IoT’s use

casesHealth

Any insurance solution basedon sensors for collecting data on the state of an insured risk and

telematics for remote transmission and management of the data

collected

Connected Insurance

Industrial risks and specialty lines

Auto

Home…

Life

5

Observatory's goal Acrivities

The Observatory provides to the participants the best knowledge available worldwide on Connected Insurance

Scouting and structuring quali/quantitative knowledge

on Connected Insurance

Sharing a critical point of view of key trends and

spreading innovation culture

Encouraging stakeholders discuss experiences and

exchange ideas about innovation

1. Collection of evidences concerning connected insurance approaches

2. Researches on consumer expectation and on distribution of connected insurance products

3.Best practice analysis with market benchmark and international innovation scouting

4. 1to1 deep dive meetings (workshops) with each Insurance Company to present and discuss the evidence of the research

5. Three annual collegial events in order to share with Observatory's Stakeholders ideas and experiences on connected insurance

6

The current participants to the European Connected Insurance Observatory 2017 edition

AIBA

Zurich

Allianz Worldwide Partners

Swiss Re

Munich Re

RGA

SCOR

Reale Group

Chubb

Cardif

AVIPOP (AVIVA)

IMA Assistance

Cattolica Assicurazioni

Guidewire

Octo Telematics

Vodafone

Aubay Sysdata

InsurtechNews

Do Different

Portolano

InsurersRe-Insurers

Techs

Others

HelvetiaChiara Assicurazioni

Sara Assicurazioni

UnipolSai

Groupama

AXA

Cloudera

7

The Connected Insurance Observatory started in March the North American operations

The two Observatories together will create an impressive opportunity

to cross-fertilize the insurance innovation

thoughts across geographies

More than 25members have joined the 2017

edition

12 members have already

joined

8

Ten months dedicated to study and discuss the Connected Insurance opportunity

Mar Apr May Jun Jul Aug Sep Oct Nov Dic

Research One to oneworkshops

June 16 New York(first collegial

meeting)


October 2 Las Vegas(Second collegial

meeting)


One day event(collegialmeeting)

We are starting the one to one meeting and continuing in parallel the onboarding of the members

9

Anne Melissa DowlingFormer Director,

Illinois Department of Insurance

A senior and world-renowned Advisory Committee supports the activities of the North American Connected Insurance Observatory

Steve AndersonPresident,

The Anderson Network

Mike ScrudatoSVP Strategic Innovation Leader,

Munich Re America

Paul CarrollCEO,

Insurance Thought Leadership

Ujjval PatelVice President - Research & Strategy

ACORD

Antonio DerossiManaging Partner Insurance at

Propeller Venture Capital

10

Perform a new virtuous role for society by providing positive externalities for a sustainable society

Sustainability4

Connected insurance is about value sharing

Create and consolidate knowledge about the risks and the customer base

Knowledge creation

3

Enhance proximity and interaction frequency with the customer while creating new customer experience and

offering additional services

Frequency of interaction

2

Improve insurance profit & loss through specialization and share part of this value with the customer

Benefits on the insurance

bottom line1

Source: Connected Insurance Observatory

11

The IoT is definitely relevant for the North American insurance sector

"Do you think that connected insurance will be a relevant technology for the North American insurance sector?"

46%A new

paradigm

54%An

incremental innovation

93%yes

7%no

Source: ACORD members, February 2017, 156 answers

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Auto telematics is the most mature use case and the area where the benefits have been already identified

% of high relevance on

total respondents*

90%

40%

Market maturity

Incubation phase Exploration phase Learning phase

Auto

• First pilots focused on one use case • First pilots

• Roll out by few pioneers

• Pilot phases by greatest part of players by using a "me-too" approach

• Only few top players understand telematics full potential (UW, claims, VAS), define their own approach (e.g. big data) and push the selling phase

• Differentiation of the commercial offers

HomeHealth

Life

Industrial risks and specialties


13

• First pilots focused on one use case

Incubation phase

Growth phase

Maturity phase

Exploration phase

Learning phase


• Roll out by few pioneers

• Pilot phases by greatest part of players by using a "me-too" approach


• Commercial offer differentiation

• Telematics potential fully understood and increased commercial push by all players

• Differentiated solutions / providers over top players

• Telematics approach is the standard for the insurance business

• Relationship consolidation between top players and providers, best practices cross-country diffusion

The North American market looks at the first steps of the telematics adoption

14%31%

19%

36%

"How do you judge the motor telematics level of maturity in the US market?”

Objective outside-in evaluation of the

market maturity level


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The customer are ready. Are you?

0

20

40

60

80

100%

Italy UK U.S. Germany France

5 Very Likely432

1 Not at AllLikely

"How likely would you be willing to agree to have a

black box fitted in your car or a driving app on your

smartphone that would track position and driving

behaviors in order to receive services and a discount on

your auto insurance premium?"

Source: Connected Insurance Observatory, SSI

15

“What is the ROI of the use case?"

"Does the approach make sense?"

“What is the best way to do it at my company?"

• First pilots focused on one use case

Incubation phase

Growth phase

Maturity phase

Exploration phase

Learning phase


• First pilots• Roll out by few

pioneers• Pilot phases by greatest

part of players by using a "me-too" approach


• Commercial offer differentiation

• Telematics potential fully understood and increased commercial push by all players

• Differentiating solutions / providers over top players

• Telematics approach is the standard for the insurance business

• Relationship consolidation between top players and providers, best practices cross-country diffusion

Also when it works well, it will not happen overnight

16

Auto insurance: the customer’s whishes

Claims supportClaims interaction,

though infrequent, is the moment of Truth

SavingThe price is the main driver for choosing the insurance product for more than 50%

of the customer base

Additional services60% of customers would

value a platform for services beyond

insurance coverage

Source: Connected Insurance Observatory/SSI; Bain/Research Now NPS survey

17

“I am the Telematics Genie. I grant 3 wishes that help people along with their auto insurance.”

“For my first wish, I would like to save money on my auto insurance coverage”

“OK Genie, for my next wish, I want a better support if I’ll have a crash”

“OK Genie, for my last wish, I want you to make more convenient the journey with my car”

Image: Courtesy from cliparts.co

“Hi Genie, I'm a prudent driver"

“It’s done, you have 25% discount on your premium installing a small device on your car ”

“Your wish is granted, you will have a real time assistance and the automatic claim filling”

“Your wish is my command, you have a suite of services based on the telematics data”

Matteo Carbone, 28 April 2016

A tale from a market where telematics come to age

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Telematics, what am I talking about?

Telematics deviceBlackbox to be installed on

top to the battery for all the year (self-installing)

Insurance coverageAuto liability insurance

coverage with 25% up-front flat discount

ServicesBundle of services with an annual fee charged to the

customer (50€)

This is the typical product on the Italian market

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The business case for the client

3% 3%

48%40%

34%35%

13%17%

3% 5%

<200€

200-400€

400-600€

600-900€>900€

Insurancemarket

Telematispolicies

Auto insurancepremium paid 1250 € - 312 €

938 €50 € 988 €

Discount Discountedprice

FinalPrice

Client feeStartingprice

- 75 €225 €

50 € 275 €

Discount Discountedprice

FinalPrice

Client feeStartingprice

300 €

20

Italian insurers have shaped the drivers’ journey and improved their customer experience with a suite di services


Weather alert based on geo-localizationg

2

Alert in case speed limits are exceeded

2

While driving

In case of crashWhen parked

Road or medical assistance via

dedicated button

4

Simplified claim notification, including automatic form fill-in based on telematics

data

7

Highway/ parking area

tolling

3

Automatic assistance to the

client on the premises in case of

severe accident

6

Parking localiza-

tionAlert if the car is hit when parked

Antitheft service if the box is removed/

uninstalled

Alert in case the vehicle is moved when the engine is off (e.g.

tow-away)

10

11

14

Stolen veicle recovery

16

Short-time theft cover

Damages Photo

Claims feature

9

12

Alert if the car is hit when parked

13

Bodyguard for emergency outside the car when

parked

15

Client assistance and personalized case

management in case of crash

5

NOT EXAUSTIVE

Claim certification at client's disposal

8

21

Telematics penetration on total auto insurance contracts

2014

2015 20

16

12.313.0

15.6

2014 2015 20

16

16.2

13.614.5

2014 20

15 2016

18.0

15.5

13.6

2014 20

15 2016

19.0

15.8

13.6

Auto telematics come to age on the Italian market

Q1 Q2 Q3 Q4

The bigger auto insurance player

has a penetration >35%

A couple of competitors shows penetration higher

than 20%

22

What about the insurer’s perspective?

Source: Connected Insurance Observatory,SSI

ITALIAN MARKET

Traditionalbottom line

Risk selfselection

23

Telematics on the Italian market have an impressive self selection effect (acquisition of low risk clients)

MTPL claims

frequency-20%

Market average(20%)

Claims frequency (district average)

Black box effect on

claims frequency(risk adjusted)

Source: ANIA (2014 data), Connected Insurance Observatory

MULTIVARIATE ANALYSIS BASEDON 87% OF THE MARKET

Black box impact by districtRISK SELECTION

Market average

-20%

3.0 6.0 6.5%Market average

4,8%

4.5

24Source: Connected Insurance Observatory,SSI

ITALIAN MARKET


Risk selfselection

Claims costreduction

What about the insurer’s perspective?

25

+100%Insurer's body shops usage

+5% speed settlement

-11% material damage costs


Material benefits achievable using the telematics data on the claim handling process

-18% body injuries incidence

TELEMATICSBEST PRACTICESLOSS CONTROL

MTPL average

claim cost-7%

26Source: Connected Insurance Observatory,SSI

ITALIAN MARKET


Risk selfselection

Claims costreduction

Service fees paid by the customer

Bottom linewith telematics

Hardware

TSP

Telematicscosts

Discount to

costumer

Benefitsretrocession

Retention

More than 60% of the Italian More than 60% of the Italian telematics volumes have an

yearly service fees to the customers (50-100€ charged

to the client)

Intermediary additional

remuneration

What about the insurer perspective?

27

The telematics portfolio shows a higher persistency

0%

2%

4%

6%

8%

10%

12%

14%

16%

No telematics TelematicsSource: Ivass (2016 data), Connected Insurance Observatory

MTPL churn rate

-25%

Churn rate

LOYALTY

28

Mobilizing more use cases based on the telematics data the benefits generated on the bottom line are larger than the discount and the telematics costs

25% discount on auto insurance premium

and50-100€ as yearly telematics costs

Value creation levers (use cases) Costs

29

There are examples where the behavioral change was already exploited

Source: Discovery

Discovery created a reward model extremely relevant on the South African market and it is scaling at international level

30

Discovery integrated connected insurance in their loyalty and behavioral change program

Source: Discovery

31

Apple Watch is becoming one of the key element of the Vitality approach

Source: Discovery

32

Members engage in their

health and wellness

Members change their behavior

Members achieve improved health

outcomes

Insurer/employers experience better

profitability (ie. claim performance)

Insurer invest part of the actuarial

profit intro incentives

Member are rewarded for their

improvements

Healthier members stay

The Vitality approach is based on an engagement finalized to improve the technical results

Source: Discovery

33


Risk selfselection

Clientcontribution

Partners contributions


Behavioral changes


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Behavioral changes improve the health technical profitability

Source: Discovery

35

Larger employer group claim experience

Claims incidence

EngagementLow

High

Low HighSource: Discovery

Better technical profitability on group business

36

Behavioral changes improve the life technical profitability

Source: Discovery

37


Risk selfselection

Clientcontribution

Partners contributions

Bottom linewith Vitality

Incentivesand

lowerpremiums

Valuesharing


Behavioral changes


38

Connectged insurance is a journey, not a destination

Set strategic goals/ ambition for the introduction of connected insurance

Connected insurance approach

• User experience

• Pricing approach

• Value added services

• Loyalty systems and "behavior steering"

• Hardware and data gathering approach

• Make vs buy decisions

• Enablers (process and tools)

• Effectiveness and readiness of organization

• Implementation and continuous improvement

A

B

C

CONNECTED INSURANCESTRATEGY

VALUEPROPOSITION

EMBEDDING CONNECTED

INSURANCE IN THE ORGANIZATION

Feel free to contact me to join the journey of the North American Connected Insurance Observatory

[email protected]

+393346220378

The North American Connected Insurance Observatory · Auto telematics is the most mature use case...

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