IoT insurance lessons learned
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Matteo Carbone has advised over 110 organizations in more than 15 countries on IoT insurance projects. He has worked with players accounting for over 80% of IoT insurance volumes and debated IoT opportunities at over 110 conferences. Carbone has also authored 5 papers on Insurance IoT with international organizations. Some relevant IoT insurance success stories include products sold through current channels, fees paid for services including device rental, usage of data for multiple uses like risk selection and pricing, value shared with customers through discounts, and insurers providing devices and apps. Insurers can create a bundle between insurance and IoT services by using data to improve underwriting while delivering services to create value that can be shared with customers.
IoT insurance lessons learned
- 1. Lessons learned with insurance IoT at international level Matteo Carbone Founder and Director, IoT Insurance Observatory @mcins_
- 2. 2 My experience with IoT insurance Organizations In the past 6 years, I advised more than 110 organizations (Insurer, Reinsurers, Brokers, Vendors, and Investors) in more than 15 different countries on IoT insurance projects +110 Market share I’ve worked directly with players accounting for more than 80% of IoT insurance volumes (number of policies on auto telematics, smart home, and connected health/life) +80% 5 +1200 +110 Conferences I have debated the insurance IoT opportunity at more than 110 conferences around the word since December 2015 Papers I have produced 5 white papers on Insurance IoT, which have been co-authored with prestigious international organizations Hours Almost 1200 hours discussing concrete experiences, best practices and pitfalls with the executives of the organization members of the Observatory
- 3. 3 Even in the insurance sector, we are in the age of post truth Telematics is usage-based insurance IoT Insurance is about how to collect data to find a profitable underwriting formula It’s is impossible for an insurer to charge fees to customers for services Customers don’t want to share data with us Converting IoT data into actionable insights is still a wish… we are not yet ready to make smart actions IoT is not able to select risks better than the credit score There is no ROI on Insurance IoT, it is only premium shrinking To make insurance IoT works insurers need to work with OEMs, GAFA… What have you heard about Insurance IoT?
- 4. 4 There are some relevant IoT insurance success stories out there What has worked as of today: 1 A product sold through the current distribution channels (frequently as an option on an existing product) 2 Fees paid by the customer for services (including the renting of the device) 3 Usage of the data for activating multiple use-cases in order to create value on the insurer’s income statement (risk self-selection, claims, change of behavior, pricing) 4 Relevant amount of value shared with customer through discount, cash- back, incentives, .. 5 A close system with device/app provided by the insurer
- 5. 5 Home insurance coverages Devices Services An enhanced insurance value proposition
- 6. 6 The bundle between the insurance contract and services The Insurance players have a unique competitive advantage vs any other service providers: • Because the same data used to deliver services allows to improve the insurance activity (assess, manage and transfer risks) • This way IoT allows to create value on the insurance P&L • This value can be shared with the client creating a valuable bundle between insurance coverages and IoT solutions The bigger the difference between insurance premium and service cost, the higher the potential of the insurance IoT approach Connected insurance paradigm
- 7. 7 RISK SELECTION: • Low-risk customer acquisition due to the storytelling of the IoT insurance product • Improved quality of underwriting process based on sensors data (including constant insights on exposure) • Increased underwriting process efficiency RISK-BASED PRICING • More accurate rating: based on measured "quantity" and "level" of risk exposure • Value propositions more attractive to the customers BEHAVIORAL CHANGE • Indirect impact on risk level through: -positive behavior reinforcement (including gamification) -culture creation • Loyalty systems based on detected behaviors (retention of low risk clients) LOSS CONTROL •Usage of the device information in order to anticipate claim management and improve reimbursement valuation •Initiatives acting directly in real-time on single situations to: -mitigate risks before damages occur -contain damages •LAE reductions •More accurate reserving Value Creation Levers How have insurers create economic value? SELL SERVICES… • …based on sensor data to deliver enlarged value propositions for the clients orchestrating an ecosystem of partners • …concerning information about insurance coverage and insured risks
- 8. 8 …this way will be higher the value that can be shared to drive the adoption
- 9. 9 …this way will be higher the value that can be shared to drive the adoption Incentives and discounts are ways of sharing with the customer part of the value create in order to deliver superior value propositions
- 10. 10 Insurance IoT reasons why Value creation IoT improves insurance profit & loss and allows insurers to share part of this value with the customer in order to increase product adoption 1 Interaction frequency It enhances proximity and interaction frequency with the customer while creating new customer experience, increasing retention and expanding relationships 2 Knowledge creation IoT approaches create and consolidate knowledge about risks and the customer base which will lead to the next generation of products and services 3 Sustainability Insurance IoT enables a new virtuous role by providing positive externalities for a sustainable society 4
- 11. 11 These thoughts come from the IoT Insurance Observatory To join the Observatory feel free to write to matteo.carbone@iotinsobs.com