The other auto insurance telematics shoe drops: who wants to be adverse selection lunch for Progressive?

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Mar 27th, 2015

Until now US insurers have intentionally restricted the impact of their telematics programs by holding riskier drivers harmless.

In other words, insurers told policyholders in their telematics programs that their premium could only go down or remain the same. Higher risk drivers’ premium would not be increased even if the telematics device revealed driving behavior which actually deserved a higher premium.

But now the world has changed. In its 2014 annual report US telematics leader Progressive dropped this bombshell: “. . . we are affording more customers discounts for their good driving behavior while for the first time, increasing rates for a small number of drivers whose driving behavior justifies such rates” (Celent emphasis). See Bloomberg for the full story.

Progressive is saying that when its telematics data indicates a higher premium for a given policyholder, it will charge that higher premium. If that policyholder can find a lower premium at another insurer, Progressive is quite happy to have that other insurer issue that policy, leading (on average) to higher losses, for a lower premium. In insurance this is known as the other insurer experiencing adverse selection.

At its most basic level, being a successful insurance company is simple. Understand the risks that are submitted to your underwriters, and charge the right premium for those risks. Progressive is not a stupid company. With this announcement Progressive is signaling that its Snapshot telematics program lets it charge a more accurate and higher premium to certain risky drivers—and it jolly well will do it.

If other leading auto insurers’ telematics data leads to the same conclusion, they will have to follow Progressive’s lead. Eat or be eaten.

Google and the insurance consumer

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Mar 6th, 2015

Today’s announcement of Google Compare Auto Insurance for California will be valued by consumers. Hopefully, it will also spur the industry to action.

Celent research has identified that consumers, in general, highly value convenience in purchasing financial services products. In the report Innovation in Insurance: A North American Consumer View, we asked consumers why they chose their preferred service method when looking for help with financial services products. Nine percent said their choice was driven by a desire for “Better Results” while 26% chose both “Convenience” and “Ease”. In short, these consumers would rather have service fast and easy, even if it is not the best result!

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We have also surveyed consumers about their preference to do business with companies which are viewed as innovative. In Making Innovation Matter, we found that the innovation reputation of a company means a great deal to those consumers who are most active in managing their finances and also to those who are “Highly Digital” (use more than 7 digital services on a routine basis).


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Google’s reputation for ease of use and also for innovation makes for an excellent fit with these declared consumer preferences. The fact that they have partnered with BOLT, an experienced insurance provider, will combine subject matter expertise with their world-class digital skills. (Read more about BOLT in this Celent report: BOLT Insurance Agency: Changing the Small Commercial Insurance Service Paradigm)

It will be good for the industry if this move motivates the bystanders to seriously pursue sustained, deliberate innovation as a response. As we documented in Innovation in Financial Services Firms: The Leadership Gap, there is a real mismatch between insurance customers’ expectations and insurers’ business strategies. In our surveys, insurance professionals repeatedly say that they believe that innovation will be critical critical to satisfying consumer expectations. However, they also say that it is only important (not critical) to fulfilling their strategy. Critical to the customer, but only important to strategy — not a good position for incumbent firms in a traditional industry.

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strategy import

From the industry veterans at Celent, here’s hoping Google’s entry shakes things up!

Round up of Making Innovation Happen – London

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Feb 27th, 2015

On Wednesday the 24th Celent hosted our event Making Innovation Happen in Insurance : Hedging Against the Future. The aim of the event was to move beyond the call to action, beyond the cries that innovation is necessary to discuss some practical ways insurers could innovate or have innovated. The feedback suggests we were able to do just that.

Jamie Macgregor welcomed our guests and introduced the day, swiftly followed by Mike Fitzgerald setting out Celent’s view on how innovation is not a dark art, but something that insurers can cultivate.

Read more…


Celent Innovation & Insight Day Preview

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Feb 26th, 2015

Celent’s Innovation and Insight Day is about a month away, and everyone at Celent couldn’t be more excited. We have great external speakers bookending the day, and we’ll be exploring exciting technology implementations with 15 Model Insurers in five categories (plus Celent’s Model Insurer of the Year):

  • Digital and Omnichannel
  • Legacy and Ecosystem Transformation
  • Data Mastery and Analytics
  • Innovation and Emerging Technologies
  • Operational Excellence in Non-Core Systems and IT Management

Our first speakers, Betsy Hubbard and Debra Jasper, are from Mindset Digital, an online social media training firm. As financial firms grapple with their approaches to social media, Betsy and Debra’s perspective, delivered in a completely different style than what most banks are used to, will provide ample food for thought and some concrete next steps.

Celent analysts will be presenting research throughout the day as winners are announced and cases are discussed.  Jamie MacGregor will also offer his perspectives on the state of innovation within the industry as well as where he sees the industry moving over the next few years.

Ending the insurance day will be Rod Willmott, Innovation Director at LV=, one of UK’s largest insurers and the third largest motor insurer.  Listen as Rod discusses how LV= established a “Fast Track Innovation” process to facilitate rapid responses to business needs and to accelerate strategic business objectives that were previously considered too challenging or costly to consider.

Registrations are running well ahead of last year, and our Carnegie Hall venue may well get to Standing Room Only (although you won’t be able to buy tickets at TKTS on Monday morning). We hope to see you there on March 23rd; to learn more and to register, please visit our I&I day site.

model insurer logo

Analytics continues to show importance in insurance

Tom Scales

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Feb 24th, 2015

As I am sure all our readers know, data analytics is a critical area for insurers. Few industries have as much data, and do as little with that data, as the insurance industry.

This was reinforced today when EXL announced their acquisition of RPM Direct, an analytics company focused on insurance.

Personally I find the use of analytics fascinating and see it every day when I get phone calls and emails that are clearly targeted at me. Sometimes it reaches the level of creepy — like the targeted ads on Facebook after I search for something on Google. Those searches follow me around for months. Good thing my searches are pretty innocuous. I do suspect I confuse their algorithms, as I am both a member of AARP and the father of four children under the age of five.

I would love to see insurers do more, but suspect they’re caught in the age old trap of ‘who owns the customer’. Most insurers with which I work still abide by the philosophy that the agent owns the customer.

My usual reaction is “STOP THAT”. Yes, that bluntly. Our world is changing and consumers want convenience and ease of access. The idea that a first time Life insurance buyer, say age 30, would ask an agent to come to their house actually makes me laugh. They’ll buy on their tablet and their phone. It’s time for insurers to step up and understand that.

Once they do, the power of data analytics and data mining will be huge. Think of the data — beneficiary data, life event data, so much about their customers and their customer’s families — all going to waste.

I keep saying that a company that doesn’t have baggage will come into our market and change things. The heart of that change will be phone/tablet/web sales backed with analytics.

Is that Google, Facebook or my favorite prediction Amazon? I don’t know, but it sure will be disruptive.

Good for EXL for catching the wave early.


Are wearables truly this big? (The Apple Bounce)

Tom Scales

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Feb 23rd, 2015

An interesting research paper was pointed out to me by a colleague today. In the report from Tractica, titled, Wearables Device Market Forecast (follow the link to learn more), the summary projects a growth from 17 million in 2013 to 187 million units in 2015.

I am not doubting their research (and I admit, I only have access to the summary), as projections are based on many factors.

I just don’t believe it. Only 720,000 Androidwear watches were sold in 2014. They have glaring weaknesses, but some are not too bad (full disclosure: I wear an LG G Watch R). I guess the key question is whether the Apple brand can really drive an entire market — one that they did not invent.

Apple has been amazingly successful in so many markets. They revolutionized the market with the iPod, the iPhone and the iPad. Were they always first? No, a lot of products before. Were they always best? Again, no, superior devices have fallen.

But Apple is, well, Apple and their power is indefinable.

I just still can’t get my head around 187 million, particularly now that Apple has backed away from so many of the ‘really cool’ features (see my prior blog post).

OK, now that I have been a downer, I admit I want the market to explode. I like my watch, but don’t love it. I want it to be smaller, lighter and have better battery life. I want to market to continue to innovate and nothing does that like competition and volume.

I guess time will tell. I’ll make a note to look back in 2016 and see what actually happened.


Major software vendor acquisition: TAI

Tom Scales

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Feb 19th, 2015

There was a major upheaval in the vendor space with msg global and Logiq3 acquiring TAI. For those not in the know, TAI has been a major player in the Ceded Reinsurance space for a long time. Their impact on the market is hugely disproportionate to their small size.


This is a big deal for all their customers and those considering becoming their customer. They have investment behind them now, which should be good.


Of course, acquisitions come with disruption, as we have seen in the industry before, so we are hopeful this will transition smoothly and those involved will continue to be involved.


Something to watch for today. Read the press release here.


If Apple can’t do wearables, who can?

Tom Scales

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Feb 18th, 2015

As we all know, the idea of wearables is very topical, but not selling well. All Androidwear watches combined only sold 720,000 watches last year. (Full disclosure, I like mine).

Now we have news out of Apple that its most hyped feature isn’t going to happen. The watch was supposed to check our blood pressure and the oxygen in our blood and even our stress level. These are important measures of health.

Apple announced that it is apparently too difficult, at least with today’s technology. More advanced features, like glucose detection had not even been planned (admittedly, no one has reliably accomplished that yet).

Does this spell the death of wearables? Probably not, they may just be farther out than we would like.

Personally, I believe that real-time monitoring of your health is a big part of our future. Apple’s simple design seemed great, and of particular interest to their customer base.

I guess the time has not yet come. Unless Samsung beats them to it.


The security breach of the month/week/day – and why you should consider the Cloud

Tom Scales

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Feb 6th, 2015

I don’t want to pick on one particular company, but the breach at Anthem hits pretty close to home — our industry is under attack. Should this surprise you? Absolutely not. What is particularly concerning is that these are companies that are spending enormous sums of money to stop these intrusions.


And are still getting hacked. JPMorgan Chase, Home Depot, Target, Michaels. I list these, not just as a reminder, but because I personally was affected by all four breaches. I’m on my third credit card in just over a year because every breach forces a new one. The JPMorgan Chase and the Anthem breaches are different and more onerous. In the Target breach, and others like it, credit cards were compromised. You can close a credit card account. In the recently disclosed Anthem breach — everything was lost. Name, Address, Social Security number, employer, net worth.


In other words, everything to steal your identity. I can’t close my life and open a new one. Is there a purpose to this rant? There is.


First, the technology exists — and is reasonably affordable — to encrypt this data. Is it a big project? Of course. Do you still want me to be your customer? How is it that in 2015 critical data about me is sitting in a data center and not encrypted?


Second, one of the biggest arguments against using applications in the Cloud is that having data in your own data center is more secure. Really? Seems not. I was recently discussing running a Life insurance system in the cloud with the CIO of a larger insurer. They put forth the ‘safer in my shop argument’, so I asked them a simple question: Is your budget for security larger than Google, Amazon or Microsoft (three of the largest Cloud vendors)?


After much thought, he replied that it was not, and our discussion changed paths. So maybe it is time to rethink the importance of your own data center. Beyond just security, is it your core competency to run a data center? Does it bring new revenue into your company to run a data center? Is it cheaper to run your own data center?


I believe the answer to all three is a resounding No. So when you are out looking for new applications and technology, I suggest it may be time, or beyond time, to think differently. Oh, and start asking your personal bank, credit union, insurance company, etc.: is my data encrypted?

Seeing claims and risks in 3D : Might HoloLens succeed where Google Glass didn’t?

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Jan 27th, 2015

There have been radical changes in user interface and computing technology over the last decade or two. The Nintendo Wii propelled a new style of gaming to the forefront and touch enabled smart devices have done wonders for Apple, Samsung and Google’s Android platform. All of this seems to have made Microsoft’s old WIMP based Windows platform less relevant, despite moves to touch enabled interfaces and Windows mobile in recent years.

Perhaps now though Microsoft has found the key to the next generation interface with HoloLens. With a tip to Google Glass this is a wearable headset based system more focused on enabling the holograph interface to interact using augmented reality to undertake various tasks. Perhaps Microsoft have found the killer App Google Glass was missing? Or perhaps the high end 3D gaming style interfaces are better at capturing our imagination than the simpler, untilitarian mobile interfaces we find on todays phones….

What might this mean for the Insurance industry? The interfaces and augmentations imagined for loss adjusters and those in the field apply equally to this new technology, albeit the headset is much more intrusive. Leveraging this technology to engage with people on the ground and share a common visualisation, to direct loss engineers to the right items and help provide data about clients in catastrophe affected areas in a rich and useful manner are all possible.

Augmented reality and chunky headsets aren’t new, but the experiences previewed by HoloLens have sparked the imagination of those who have seen and played with it. With the response to HoloLens being very positive so far I wonder if we will see a relaunch of Google Glass or it’s successor sooner than one might have expected.

For those who are interested the technology appears to have it’s origins in big data, as this article from April last year talks about leveraging the Holograph interface for visualising large datasets.