Lemonade’s and Haven Life’s Limited Launch Approach Provides Lessons for Incumbent Insurers

Tom Benton

Recently, innovation-focused startup insurers Lemonade and Haven Life both announced expansion beyond their initial states–Lemonade to all but 3 states and Haven Life adding five states and D.C., leaving only California and Montana to add. Both initially launched in limited states (33 for Haven and just New York for Lemonade). Add to this the announcement this week that Ladder has launched in its first market, California. The limited launch approach allows these companies to gather customer data and make the necessary process changes that will be critical to their data-driven approaches going forward.

As these insurance startups build their policy counts, more customer data will be accumulated that will provide better algorithm results. But, scaling up in size will offer different challenges for these “Creative Carriers”. Lemonade faces a transition of showing profitability while continuing to innovate, and Haven Life, backed by Mass Mutual, may face different pressures as they grow. In both cases, customers will continue to expect these startups to continue being innovative in how they approach customer experience.

Lemonade’s approach is centered on transparency to build trust. According to this recent blog post, they intend to soon release information on performance metrics and the impact of their ‘Giveback’ program (in which the company donates leftover money form premiums to causes customers choose). This is consistent with their focus on changing the industry by changing the dynamics of interaction based on behavioral economics principles infused in the organization by Chief Behavioral Officer Dan Ariely.

Haven Life on the other hand stays focused on creating the simplest and fastest possible experience–what they refer to as their “ridiculously easy process” for buying life insurance. Their value proposition also includes transparency, but more by providing a fast quote and enabling easy comparison price shopping.

With their expansion into new state markets, the continuing growth and adjustments at both of these innovators will be important for incumbent insurers and imitators to watch throughout 2017.

UnitedHealthcare Motion Provides Model for Faster Adoption of Wearables

Tom Benton

The potential for wearables in health and life insurance has been hindered over the past few years by lack of standards and slowing adoption by consumers. This week, UnitedHealthcare and Qualcomm announced they have “enhanced and expanded” the employee wellness program UnitedHealthcare Motion. UnitedHealthcare Motion is making progress in wearables use for wellness programs by leveraging the advantages of using the Qualcomm 2net platform, a medical-grade cloud-based infrastructure for medical device applications, with enhanced security and flexibility provided by standardization of end-to-end connectivity for wearables. The ability to quickly integrate in the Fitbit Charge 2, first shipped to consumers in mid-September 2016, shows the advantage of a standard platform that can respond to changing consumer demands and device capabilities. As mentioned in Novarica’s report on “Internet of Things, Wearables and Insurance Customer Experience”, security and standardization as seen with the UnitedHealthcare Motion BYOD capability will enable faster adoption of wearables for use by insurers to improve customer experience.

Vitality Incentivizes Life Insurance Policyholders to Becomes Less Sedentary With Cheap Apple Watches

Tom Benton

John Hancock announced this week that it will be subsidizing the cost of an Apple Watch for policyholders through its Vitality Active Rewards program. Vitality life insurance policyholders will have the opportunity to purchase a new Apple Watch for an initial fee of $25 and, depending on how active they are, will either pay off the remaining balance in monthly installments, or pay nothing beyond the initial fee. John Hancock and Vitality initially provided fitness tracking devices to policyholders, but changed the program to just collect data from insureds via device interfaces like Apple’s Healthkit.

Typically, healthcare payers and the Vitality program have provided incentives via discounts for providing the data. This new Apple Watch initiative, however, now adds in monitoring of movement data in return for a low initial cost for the device.

Vitality says it has seen positive results in studies done in South Africa, where they report that the 17,000 participants increased physical activity by 46% in a similar Apple Watch program. For those who don’t meet activity goals to earn the “Vitality Points” that fund the 24 monthly payments, there could be negative sentiment toward the program. Still, the up-front incentive to make lifestyle changes is very strong.

This program continues a trend of insurers collecting more detailed information about insureds and providing incentives to change behavior. Over time it will provide some valuable data for assessing the effectiveness of these changes on risk.

Hartford Steam Boiler Partners with L&T Infotech with Potential IoT Implications

Tom Benton

As more IoT devices go online, the challenge for insurers is how to manage data from various devices and leverage that data to assess risk. In Novarica’s report on “Internet of Things, Wearables, and Insurance Customer Experience” from April 2016, we noted that one of the main challenges is a lack of standards for interoperability and communication between devices and the systems that collect and analyze their data.

This week, Hartford Steam Boiler (HSB), a subsidiary of Munich Re specializing in equipment breakdown insurance, announced a partnership with L&T Infotech (LTI), a global IT services firm with expertise in automation of device data collection through their automation platform, MOSAIC Automation. While the deal focuses on broader system integration and management, there is potential for LTI to support the wide variety of devices and systems that HSB monitors for clients and provide standardization across HSB’s process, platform and application architecture. With LTI’s platform providing data and analytics, HSB can focus on expanding coverage to equipment with a broader set of supported sensors and on better use of the data being collected to reduce costs and enable new capabilities. HSB has shown interest in these capabilities before, investing in Waygum’s mobile app for interacting with IoT sensors last year.

While much attention is put on IoT devices for auto and smart home application, use of IoT devices and analytics for commercial applications has great potential. Most manufacturing plants, commercial office buildings and even solar farms have large numbers of sensors and systems for equipment control and monitoring, but the information is often trapped in proprietary systems with customized interfaces. LTI’s MOSAIC and platforms like it promise to consolidate the data across various interoperability standards and provide analytics that insurers can apply to risk analysis and claims. Insurers may also explore the possibility of providing value-added services to clients to predict equipment failure and have backup solutions in place to reduce downtime. IoT analytic capabilities could enable insurers to evolve from claims analysis to claims prevention, which can benefit clients by reducing the cost of equipment failure.

Self-Driving Truck Makes First Delivery

Tom Benton

Last weekend, Uber’s Otto self-driving technology arm completed a live test delivery of 50,000 cans of Budweiser beer from a brewery in Ft. Collins, CO to Colorado Springs, 120 miles away on Route 25. The trip was monitored by Uber engineers, but once the truck was on the road, the driver engaged the self-driving mode on the truck, outfitted with $30,000 in technology focused on autonomous highway navigation.

The live test is the first where a Level 4 autonomous system was used to complete a live truck delivery. Level 4, as defined by the National Highway Traffic Safety Administration and SAE (formerly the Society of Automotive Engineers), means that conditions are limited — in this case, to a well-defined highway with good weather and known construction zones — and a driver takes control when the conditions are not defined. The Uber/Otto-outfitted truck had a driver present, but not behind the wheel for the majority of the delivery trip. The driver had the ability at any time to retake control of the vehicle, but otherwise was free to read, text or almost anything else (except ironically he would certainly not be allowed by state law to pop open any of the almost unlimited cans of beer being delivered).

Self-driving trucks can have a significant and quick impact on highway safety, reducing the estimated annual 400,000 crashes and 4,000 fatalities, according to the article. Drivers are still required for ensuring safe movement of the trucks to and from the highway, but can be otherwise occupied during the long runs on interstate highways, which are manageable for companies like Uber to map and monitor for conditions that may require human interaction.

This successful test is another step toward acceptance of self-driving technologies for both commercial and consumer use. Insurers need to consider the risk-reducing potential of these systems and the increased level of repair costs due to expensive self-driving technology that could be damaged during accidents, whether in autonomous mode or not. The future of trucking is here -– it may not be long before you see driverless trucks rolling along your local interstate.

DDoS Attacks and Consumer Data

Tom Benton

On this past Friday (10/21), many of you may have noticed problems connecting to Twitter or streaming Spotify and probably know now that the cause was the latest internet attack. The attack was a DDoS (distributed denial of service) attack where thousands of computing devices infected with the Mirai botnet code targeted the Dyn’s internet servers. Dyn is a Domain Name System management services provider used by Spotify, Github and other popular internet sites.

The internet experiences an increasing number of DDoS attacks – some estimates are at over 124,000 per week against enterprise networks. What was different about this attack was the Mirai botnet compromises common Internet of Things (IoT) devices, such as internet-enabled DVR’s (digital video recorders), security webcams and poorly secured internet routers. The basic plan of attack is to use standard administrator accounts and passwords provided by the device manufacturers and rarely changed by the consumer. (By the way, in most cases an easy fix is to reboot the device and change the administrator password.)

Security blogger Bruce Schneier recently wrote the “someone is learning how to take down the Internet”. He and other security experts warn that this could just be the beginning of more frequent and sophisticated attacks that are also larger and more damaging to internet site accessibility.

In Novarica’s report on IoT, Wearables and Customer Service, we mentioned five challenges for consumer adoption – security was an important one: “Adoption depends on building user trust and avoiding potentially hazardous hacking of devices, especially for automobile operation, home security, and drone operation. Security thus far has been the responsibility of device manufacturers, who may neglect it in order to keep prices competitive.”

As carriers begin to consider how to provide IoT and wearables to consumers and use the data, security should remain a concern so that consumer data is better protected along with brand name. Carriers should press device manufacturers to improve IoT security and CIOs should consult with their CISO or security consultants about how to be better prepared for DDOS attacks in the future.

DC Plan Advisors are Planning to Adjust Products in Wake of DOL Ruling

Tom Benton

As the DOL regulation deadline approaches for 2017, insurance CIOs continue to be concerned about their company’s approach and how to have their distribution compensation and other systems prepared in time. Some insurers will change their product offerings and distribution of offerings in preparation. The report from Ignite Retirement Research (as reported in Retirement Income Journal) outlines how Defined Contribution (DC) plan advisors are also planning to adjust product offerings to meet the regulation. The report’s finding is that 8% will reduce offerings of annuities, with over a quarter expecting index equity mutual funds to increase for DC plans, but it seems likely both numbers will rise as the deadline approaches. The general trend toward indexed annuities and mutual funds means less demand for annuities from DC plans, which will will have a disruptive effect on the market, adding more uncertainty for annuities providers and advisors and concerns for CIOs who need direction from them for system modifications.

Hartford Steam Boiler Acquired Industrial IoT Startup Meshify

Tom Benton

As Internet of Things (IoT) devices and data become increasingly important for smart homes, smart buildings and smart facilities, insurers are considering how to leverage IoT for underwriting, loss prevention and claims. However, they face several challenges, among them the lack of standards for interfacing with IoT devices and platforms to take in the data and integrating the large volumes of data into analytics platforms to leverage the data. Hartford Steam Boiler (HSB) remains on the leading edge of IoT through their acquisition of Meshify this week, along with their investment in IoT startup Waygum last year. Meshify provides a cloud-based platform that “makes any device smart” along with tools for real-time monitoring, alerting and access to information through mobile applications. HSB and parent Munich Re consider the acquisition as a strengthening of their technical capabilities for providing innovation to their customers. Meshify’s capabilities will help HSB’s customers collect important data for risk reduction, but should also enable HSB to go beyond a value-added service for customers to better analyzing customer risk for underwriting and product pricing.

Thoughts from Insuretech Connect

Tom Benton

Last week I moderated a panel discussion on insurance innovation and accelerators at the Insuretech Connect conference in Las Vegas. The conference attracted over 1500 with a mix of insurance carrier innovation leaders, startup entrepreneurs and venture capital executives from the U.S. and all over the world. The conference sessions were mostly standing room only, and the exhibit floor was buzzing with conversations around innovating the insurance business.

On day one we heard from Scott Walchek, CEO at Trov, about their disruptive approach to insuring personal items – any item, any time for any duration. They are currently only operating outside the U.S. and for electronics items only, but expect to expand the categories covered and enter the U.S. market next year. He spoke about the need for transparency for insurance distribution, and shared thoughts on how to stay focused when faced with the uncertainty and challenges of launching a startup.

Other sessions on day one focused on Insuretech trends, with active discussion around customer experience and how to lower the friction of doing business at insurers. I talked with startups like Roost, Sureify, Carpe.io, Amodo and others that are finding innovative ways to use data and IoT devices for insurance applications. I also had great discussions with innovation leaders at insurers looking for ways to integrate new ideas into their distribution and operations as well as established solution vendors looking for how to engage with startups to improve their current insurance technology offerings.

Day two started with an interview with Daniel Schreiber, CEO of Lemonade, who talked about their strategy to build a vertically integrated insurance company and to leverage both analytics and behavioral economics to reduce operational friction and shape the customer experience. For example, they expect to build trust in the company by having customers designate a charity for return of unclaimed funds – they see this as a way to reverse the general negative perception customers have about insurance carriers.

My panel discussion was on day two and it included the managing directors/founders of four prominent startup accelerators – Global Insurance Accelerator, Plug and Play Ventures, OnRamp/gener8tor and Startup Bootcamp Insuretech (London). The panelists talked about their programs, the key success factors of working with accelerators, how they help bridge the gap in culture between startups and sponsor carriers (in their language, “incumbent insurers”) and how they see insurers integrating Insuretech into their operations.

As I talked with various attendees, we discussed how quickly disruption will happen from innovation in the industry. Many startup leaders see disruption happening now and in the next few years, while carriers and others see it taking longer. Considering the active interaction and interest of the conference attendees, it’s clear that no matter how one defines innovation or how long one thinks it will take to see major disruption, the new era of Insuretech is beginning to have an impact on the industry.

If you’d like to hear more about the conference, please contact me. Also see Novarica’s update report on accelerators and VC and our report on disrupters.

Aetna and Apple Partnered to Provide Wearable Devices for Wellness

Tom Benton

Aetna’s announcement of a partnership with Apple joins other efforts this year to provide incentives to insureds to share fitness data via wearable devices. Earlier this year, John Hancock teamed with Vitality to provide insurance discounts and Oscar provided devices to customers in exchange for the data. By choosing the Apple watch and Apple Health apps as a platform, Aetna’s partnership is leveraging the popularity of the devices and general fitness and wellness trends that are fueling consumer interest in wearables. As with other technology, consumers are becoming more accepting of sharing fitness data with expectations of some benefit in return, but issues remain about privacy of data and accuracy of the devices as well as the correlation of wearing fitness devices to general health parameters such as weight loss or overall health. However, by partnering with Apple, Aetna will have access to valuable wearer data as well as a popular platform for offering wearable-related wellness services.