Wearables and Gamification in Life Insurance Goes Mainstream?

Matthew Josefowicz

John Hancock’s new life insurance program that gives discount points for behavioral modification was covered in this morning’s New York Times.

The article was titled “Giving Out Private Data for Discount in Insurance,” which gives an idea of the initial media reaction. If these types of product offerings are going to catch on, insurers will need to invest in changing the narrative to “Insurer Encourages Healthy Behavior in Policyholders.” Nonetheless, it’s encouraging to see these kinds of initiatives getting mainstream coverage, and we believe this is only the beginning. As we said recently, the future just keeps getting closer

With so many US households still uninsured, insurers are going have to try new things to re-position their product, focusing on consumer needs. New technologies like wearables and the Internet of Things will be an important part of executing that strategy, but insurers shouldn’t confuse adopting new tools with adopting a new orientation.

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Insurance Industry Remembers that Investment Dollars Buy Access to Innovation

Matthew Josefowicz

Everything old is new again. Like the E-Venture Investment Groups of the late 90′s and early 2000′s, a new crop of investment activity is springing up in the insurance industry, with the hope of giving the industry a preview of tomorrow’s capabilities and approaches.

This includes single company initiatives like AXA Strategic Ventures and American Family Ventures, as well as the Des Moines-based Global Insurance Accelerator incubator, and the recently announced ACORD Insurance Innovation Challenge showcase for start-ups.

It’s almost as if the industry woke up and realized it didn’t have to sit and wait to be disrupted from the outside. A multi-billion dollar industry can buy some of its own innovation!

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Don’t Get Tripped by a Tipping Point!

Rob McIsaac

Late last year I had the opportunity to spend time exploring Silicon Valley in depth which created a new-found appreciation for the form and function of innovation that comes from that singular location. The interconnectedness and leverage that has been created by having a unique combination of talent, financing, risk taking and competition is impressive. The number of companies tied to financial services looking to form innovation centers in this unique environment continues to grow.

Another observation from that tour was the rather surprising connection between technology innovation and utilization in areas focused on entertainment. The recognition that HP’s first big order fulfilled out of “The Garage” went to Walt Disney is a point well taken.

Recently I had a chance to see this point of intersection from a different perspective, this time at the Disney World complex. This is another eye opening event that has some potentially key insights for financial services purveyors. It is not a story about magical mice but rather about technology advances and adoption. Insurance carriers would be wise to take note.

As a veteran of Disney trips, I didn’t expect to be amazed in any way. I was wrong. Visiting as an adult observer with too much time on my hands (translation: no kids to manage) afforded an opportunity to watch how new technology has changed the operation of the properties and the way customers interact with them. For example, upon entering the grounds, you are given a stylish armband that looks like a high end Fitbit device. This is how you track your reservations, book special events, manage your tickets and connect with groups on the property. It is also your virtual wallet. Wherever you go, simply touch the wristband to a reader and you are magically able to proceed.

Of course the flip side of this is that Mickey (or a delegate) pretty much knows where you are all the time. As a result, workflow capabilities are optimized. Buses seem to be at the right place at the right time. Support staff placement is optimized. Wait lines are minimized. There’s a smart phone app that helps manage the experience on those moments when you need a keyboard. For anyone with a Fitbit (or equivalent) on the other wrist, the learning curve is essentially zero.

But that wasn’t even the best part. Upon entering a place where value is consumed from the wrist-wallet, such as entering a park, they have deployed two-factor authentication. In addition to reading the wristband there are fingerprint readers everywhere. Scan your wrist, read your index finger and you are “good to go”. It is smooth, clean and fast. More to the point, Disney is now training tens of thousands of new people every day on how to use the technology. They are also setting a high bar for what a good, effective, non-intrusive security experience can be like. In a word, it is “slick”.

The implications for insurance are broad and potentially represent a tipping point which also happens to coincide with the number of Millennials in the US exceeding the number of Baby Boomers for the first time. People are ever more willing to give up personal information for the promise of a better deal, an enhanced experience and better service. Holiday trips can now join Amazon shopping experiences as a place where things just seem to work well and a byproduct of it all can be targeted messaging that can affirm that “smart people like you” found value in this next call to action.

Returning to a world dominated by last century technology, and last century experiences, will increasingly seem quaint and out of touch with a new reality. The fact that they are slow and painful may seal a deal of irrelevance.

Is it any wonder that Google appears poised to move into the insurance space or that Silicon Valley VC firm Andreessen Horowitz sees insurance as a business that is poised for disruption? Being tripped by a tipping point can be hard to recover from. Just ask Kodak.

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The future just keeps getting closer…

Matthew Josefowicz

In case you were wondering when the great disrupters in Silicon Valley would turn their attention to the insurance industry, wonder no longer, and read this post on the Andreesen Horowitz site from 1/22/15.

How about an insurance company that empowers you to make smart lifestyle decisions? Examples: the car insurance company that routes you around dangerous intersections; the home insurance company that automatically summons a plumber when it detects water on the floor near the water heater; or the health insurance company that connects you with friends that are also trying to lose weight?

By encouraging us to keep safe, insurance companies can keep their payouts low. And we all bask in the glow of an insurance company that has our best interests at heart — because even though our interests are really aligned, it doesn’t always feel that way

Combined with the recent news about Google’s recent moves in auto insurance, it’s pretty clear that tech is starting to smell blood in insurance.

The barbarians are coming. Insurers need to suit up.

The barbarians don’t care about tradition, or the way it used to be, or what yesterday’s customers liked. They see only need and opportunity. Insurers need to adopt this mindset quickly.

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The Usage-Based Insurance (UBI) Short Cut: Developing a usage-based insurance program has now gotten easier

Thuy Osman

I’ve been following telematics in insurance since 2012 and the main thing I’ve noticed is that the application of telematics by insurers moves at a sluggish pace. While telematics service providers continually improve their platforms and services, offering insurers multiple ways to collect data (connected car, OBD plug in, mobile app), numerous data points to analyze (speed, braking, cornering, road type, etc.), and various applications for the analyzed data (from underwriting to claims), many insurers are still stuck in the initial phase of designing and developing a UBI program.

Aside from the issue of patents, the concern I hear most from carriers who are in the process of developing a UBI program is the data approach. Deciding on what data to collect, how to collect the data, and how to store and analyze the data is a huge obstacle. The main point of the data process is to arrive at some sort of driver risk score. Instead of throwing time and resources to come up with that score, carriers can now partner with an external analytics vendor who will collect, analyze and synthesize the data into a risk score that can then be used by underwriters to determine eligibility for discounts or rewards.

Partnering with an analytics vendor and using their program, such as Verisk Telematics Safety Scoring program (which, it was recently announced, is now approved in 41 states), essentially allow carriers to skip over the data process and jump straight to developing insurance products based on risk scores. Sure, carriers will still have to determine which driving behaviors constitute risk to their company. But, checking off the behaviors on a list for the analytics provider is far more efficient than planning out the hardware to collect the data, storing the data, and in particular, wading through pools of data to make some sense of it all.

A few years ago at a summit for telematics in insurance, the presenters were talking about the possibility of deriving a driver risk score from the telematics data collected from a vehicle. At that time, only a small number of vendors had large enough data sets that could be representative of a segment of the customer driver pool. Today, analytics vendors and telematics service providers alike have collected enough miles and other driving data to develop an algorithm (however simple or complex) to calculate a driver risk score. In fact, providing carriers with a driver score is one of the standard services a TSP provides.

For carriers who are looking to develop a UBI program, or even for carriers who are already entrenched in this process, partnering with an external vendor can save time and decrease the risk involved in launching such a program. As carriers see the benefit in this partnership and as they begin to outsource more to the data process to the data experts, maybe the application of telematics in insurance will pick up.

If you’re interested in discussing this topic further, please contact me at email to arrange a call.

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  • The Future is Here, it’s Just Not Evenly Distributed

    Matthew Josefowicz

    The WSJ today reports that Google has secured insurance agent licenses in 26 states and deepened its relationship with CoverHound. Yesterday, Accenture released a study of independent agents showing disintermediation by online distribution was their number one fear.

    On Tuesday, January 13th at 2 p.m. (EST) we’ll be presenting a webinar on Hot Topics for 2015 for insurer CIOs based on surveys of our Research Council members. With customer expectations changing across the industry, driven by changes in the technology ecosystem within the industry and across the economy, insurers need to plan to incorporate these paradigm shifts into their business and technology strategies for 2015. Or else plan to be taken by surprise.

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    NYT: Insurance Fails to Meet Evolving Needs, Tech Transformation Means Embracing Failure

    Matthew Josefowicz

    I came across two interesting articles in the NYT recently that I wanted to share with our Council members and clients, since they nicely illustrate some of the themes of change and adaptability that have been some prominent in our recent discussions.

    The first, The Insurance Market Mystifies an AirBnB Host describes the challenges that a homeowner had trying to secure coverage that would allow her to operate as an AirBnB host. As the Times sees it,

    …this is mostly the fault of the insurance industry, which doesn’t always want to answer questions about this sort of activity, whose agents aren’t always as knowledgeable as they should be and whose own policy language can be incredibly confusing.

    Whether or not you feel this is fair, or however you feel about the emergence of the “sharing” economy and its attendant risks, the article makes an important point. There are consumers out there who want to manage their risks, and the insurance industry is not helping them. Stuck in old definitions of personal v. commercial, and old product and distribution models, the insurance industry is missing this opportunity to be more demand-led.

    The other article was actually from a few weeks ago. Called Welcome to the Failure Age, the article uses a story about the rapid turnover of innovation enterprises in Silicon Valley to make a larger point about the increased rate of failure that goes along with the increased rate of innovation. While many insurers have proclaimed themselves dedicated to innovation (Novarica research shows that more than 1/3 of large P&C cos now tie innovation to executive comp), few insurers have developed the institutional tolerance for failure that goes along with innovation.The article also talks about the way that information technology advances are changing the nature of corporations themselves:

    Corporations “were created to coordinate and organize communication among lots of different people,” says Chris Dixon, a partner at the venture-capital firm Andreessen Horowitz. “A lot of those organizations are being replaced by computer networks….If you had to know one thing that will explain the next 20 years, that’s the key idea: We are moving toward a period of decentralization.”

    This is an incredible challenge for companies in every industry, not just insurance. The central problem of the corporation, of coordinating the work and capital of thousands of individuals, is changing.
    The article closes with this thought:

    We are a strange species, at once risk-averse and thrill-seeking, terrified of failure but eager for new adventure. If we discover ways to share those risks and those rewards, then we could conceivably arrive somewhere better.

    In my mind, this is a hopeful thought for the insurance industry. Currently, there’s no set of institutions better positioned to manage risk. But the way the industry manages risk in the future will not look like the past.

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    Lessons from Peter Drucker

    Paul Ptashnick

    As I was reading our latest report: Benchmarking the “New Normal” 50 Advanced Capabilities for Property & Casualty insurers, it reminded me of a few famous quotes from management consultant, author and educator Peter Drucker. Below I have highlighted a few of his quotes and how they relate to the insurance industry.

    “The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.”

    As technology evolves it’s going to have a revolutionary impact on the insurance industry over the next few years. Some of these areas include the “Internet of Things,” Social Media, Big Data, Cloud, Mobile, Security and Digital. With the rapid changes in technology-enabled capabilities, it’s imperative for organizations to have access to the latest research and subject matter experts to stay on top of the latest trends.

    “The best way to predict your future is to create it”.

    We’re seeing larger insurers creating their own future by widening their lead in advanced capabilities in analytics, data, digital channels, modern applications and innovative business practices. In addition, some midsize insurers are also creating their own future by deploying more advanced capabilities than their peers.

    “What gets measured gets improved”

    As saavy insurers start deploying new capabilities in underwriting, product, distribution, analytics, etc., it’s vital for them to be able to track their own progress. Novarica is helping insurers to “measure and improve” their own initiatives with our new benchmarking tool.

    “The purpose of business is to create and keep a customer.”

    Technology is playing a vital role for Property & Casualty insurers in creating and keeping customers. Below are a few advanced capabilities being deployed by insurers in 2015 to help with these efforts.

    • Customer: Mobile app to view customer relationship details, balances, key documents, etc.
    • Distribution: Mobile app/mobile optimized web for producers to provide access to customer, book of business, or sales materials
    • Product: Analytics-driven product design
    • Product: Products designed to optimize buying/selling experience through one or more of the following: (a) use of pre-fill data, (b) elimination of unnecessary questions, (c) streamlined underwriting process matched to control of risk/coverage levels
    • Distribution: E-Signature
    • Underwriting: Predictive scoring based on models leveraging internal and third-party data
    • Marketing: CRM-driven campaign management that shares information across distribution, underwriting and service channels
    • Billing: Electronic bill presentment and payment
    • Analytics: Self-Service analytics based on verified and accessible enterprise data
    • Analytics: Use of Big Data tools to mine enterprise data effectively (Hadoop, NoSQL, etc.)
    • Claims: Mobile FNOL with video/GPS data capture and pre-fill

    “If you want something new, you have to stop doing something old”

    The capabilities listed in our Benchmarking the “New Normal” 50 Advanced Capabilities for P&C Insurers are widely available to insurers and are deployed more or less widely by them today. These advanced capabilities are being driven by a combination of five elements: analytics, data, digital channels, modern applications and innovate business practices. Successful organizations in the future will re-imagine and re-conceptualize their product, service and operation strategies in light of technological changes.

    As always I welcome your feedback. Send me a message at email or to learn more about Novarica’s Benchmarking the “New Normal” 50 Advanced Capabilities for P&C insurers, download a preview

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    IBM and Apple Announce First Wave of MobileFirst applications

    Tom Benton

    In July, IBM and Apple announced a partnership to combine their strengths to “transform enterprise mobility through a new class of business apps—bringing IBM’s big data and analytics capabilities to iPhone® and iPad®.”

    Last week they announced the first wave of MobileFirst for iOS apps, including one for insurance, Retention.

    The Retention app provides tools to agents for access to customer records, analytics-driven retention risk scoring and customer interactions such as e-signature and collection of premiums. Apple also announced AppleCare for Business, providing 24/7 support for business users of the apps and their iPads and iPhones, and additional services for integration and leveraging IBM’s cloud and analytics capabilities.

    While some insurers may find the initial app release of interest for agents in their distribution networks, the underlying improvement to enterprise-level capabilities is a key to further adoption of iOS apps and devices for insurance business users. Smartphones and tablets have typically been deployed using BYOD models, with support managed on a limited basis by internal IT. The IBM support services could take on that burden, freeing up IT resources.

    We’ll keep monitoring the progress of the partnership and future MobileFirst app releases. As always, feel free to contact me at email if you are interested in talking about using mobile and other digital channels for customer engagement.

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    The Experience is the Product

    Matthew Josefowicz

    I had a chance to present on customer experience in insurance recently at the Insurance Performance Association. It was an interesting event featuring several engaging speakers from outside the industry as well as business leaders and consultants from within.

    My presentation focused on the role of technology in supporting customer experience, especially in a technology-transformed world where customer expectations are set by other, more advanced industries like banking and online retail. This is an important are of research for us at Novarica: our report on Insurer Digital Capabilities focused heavily on customer and stakeholder experience, and one of our recent Research Partner Program reports focused on this topic, especially related to ECM.

    But even more important than deploying technology-enabled capabilities effectively is the incorporation of experience into the insurance product itself. As the slide below from my presentation illustrates, the overall experience of feeling covered is what insureds are buying, not just risk transfer.
    (R)Evolution in Customer Experience in Insurance

    Rather than start from a coverage and price, insurers may want to start with the customer’s need.

    This is also the topic of our latest “Novarica Quick Quote” slideshare.