- 1. The HR department who makes an announcement of significant organisational restructuring via a group email – and only via email. (When did it become OK to end personal or professional relationships via email or texts?)
- The Divisional head who lambasts his team via email for bad behaviour when it’s really only directed at one team member. (When did it become ok to use technology to be a lousy manager?)
- The family at the restaurant who don’t talk to each other over dinner as they are too busy typing into mobile phones, or watching TV on tablets. (When did it become ok not to talk to each other at dinner?)
Once again, Celent has teamed up with the Insurance Times for the 2012 Technology in Insurance Awards. These awards are the only dedicated insurance technology awards in the United Kingdom for general insurance. Last year’s awards were a huge success in recognising some terrific successes in our industry. We had 140 people attend a cocktail award’s ceremony in the iconic Gherkin building. LV=, Chartis, Ingenin, and HOV Global services were just a few of last year’s winners. Judges included Google, CEO of RSA, Editor of Insurance Times, and your own Celent analyst, myself.
This year, we have a two new categories which reflect the changing nature of technology:
– Best use in Social media
– Best use of analytics
So the important dates for your diary are:
- 11th May – Deadline for submissions (Go to Insurance times website for details on how to submit)
- Award ceremony 20th September in London
We look forward to this year’s interesting and exciting nominations, and recognising the superstars and stellar effort that is made every year in our industry. Good luck!
Growing up, I was fascinated with the TV shows of Star Trek and BattleShip Gallatica. The combination of strange looking aliens, interesting planets, and tele-transportation had me captured. It is perhaps not surprising that I ended up in the field of Computer Science. And so my inner geek was intrigued at the news in the press this week reporting the impending release of Google’s glasses.
The future may be closer than we think with this example of augmented reality features moving into the real world of you and me. (Much can be said about the impact of technology on the consumer when we have to use “real” to describe the world we live in).
Through these glasses, Google will be able to project a wide range of data onto your vision of the world, including adverts. Using GPS features, the glasses would know where you are in the world, and offer up data from your social connections on buildings and business around you. Using facial recognition software, the glasses could offer social data about the person in front of you.
The cynic in me rails against the practicalities of this all. Walking down any busy street requires my full attention to ensure my safety from cabs, pick pockets and SMSing locals. How could my mind possible deal with another stream of data through the glasses overlain on this already busy reality?
And perhaps this is just too much data. Aside from the neurological constraints of the brain processing this volume of information, there are serious concerns from consumer groups about the lack of safe guards. As the NYTimes article notes, American consumer privacy groups are lobbying for the suspension of use of facial recognition software until such a time as adequate safe guards are in place. And quite rightly so.
In the world of insurance telematics, there is huge interest if little current evidence that the mobile phone could take the role of the blackbox device in future propositions. Google glasses could play a similar role in telematics as the device offers many of the features of a smartphone. This could be an example of one technology leap-frogging another in its application.
Even if you are uncomfortable with my Star Trek proposition of glasses as a telematics device, as an industry, we need to recognise that this will be another marketing channel to our personal lines customers. This presents an opportunity of the most personalised form of marketing available. As insurers get a handle on marketing in digital channels, understanding the value of marketing in augmented realities will be next.
But if for you, like it is for me, this may well be just too much information. For the moment, I will forgo opportunities of augmented reality and stick with mere reality. And maybe catch-up on old episodes of Star Trek.
This week, Celent hosted a London event on the UK regulatory topic of Retail Distribution Review (RDR) that will impact the entire life insurance industry. As Jamie Macgregor, pointed out, there are a little over 50 planning weeks until the deadline for implementation.
Matt Browne from the FSA covered key points and intentions of the regulations, and reminded the audience that this is the time to take action, not to debate. The essence of RDR is to fix the retail long term savings and investment market which many consider is not working for the mass market customer.
Jamie Macgregor presented key points from Celent’s recent research. Insurers that were interviewed for this paper highlighted that 2012 will be a “horrible year” with the barrage of regulatory deadlines including Solvency II, EU gender directive and RDR whilst continuing to focus on new propositions for growth and profitability. The level of change and effort in Q2 and Q3 will be massive. Even with the delay in Solvency II regulations, many organisations are still committed to the same level of project effort to meet the revised deadline.
It is Celent’s view that the biggest risk facing product providers is around orchestrating the end-to-end delivery of the change program across multiple partners both upstream and downstream. This risk is then made worse by dependency on outsourced relationships within product providers and the visibility of their readiness. Effective communication across all parties involved will be a critical success factor of many programmes.
Martin McKenna from Focus solutions presented a view from a distribution perspective. He noted that IFAs had originally seen the regulation as a threat but that there was a shift in views. IFAs are starting to see this as an opportunity to de-risk the business model. It’s clear that IFAs don’t have the capacity to serve HNW, the mass affluent and the mass market . IFAs will refocus their businesses towards what they see as high value clients and this may result in orphaned clients . This is a great chance for new players to enter the market, particularly those with strong brands. New distribution opportunities become available like online only, retail outlets , and mobile. Martin went on to note that whilst the appetite for advice will still be there, consumers will want to choose companies they know and trust. This creates a space for larger brands like banks and insurers to offer products directly to the customer. His view was that the winners would be those companies who could understand the cost of servicing the customer, and who had the scale and brand to respond to the market opportunities.
In the usually quiet English summer, the country has been hit by a series of riots in several major cities. Whilst politicians and social commentators offer up the analysis of how it all happened, and homeowners and small business clean up the chaos, insurers are counting the costs. There are estimates of £200 million in claims to be picked up by the sector but the true cost of this wont be known for some months.
If there was ever a business case for the use of geographic information systems in insurance, this must be it. In the UK, the top 10 insurers in commercial and personal property together earn approximately 85% of the premium in this sector. This is huge exposure indeed. Unlike several other areas around the world, the UK is not known for large natural catastrophes. So riots and the occasional flood are the country’s reminder to insure.
In the Bunsfield oil depot explosion which impacted a large area of neighbouring commercial and residential properties in London, RSA was able within a few days to estimate the damage to their policy holders and the likely payout in claims.
Months later, with all claims finally in, the estimation was within a handful of percentage points of the actual amount. This accuracy is important to policyholders and shareholders alike. It means accurate allocation of reserves and not holding up capital unnecessarily.
GIS systems or location intelligence solutions provide valuable data at the point of underwriting and claims assessment at a portfolio level. For the commercial property underwriter, the solution provides maps highlighting other insured properties in the area. Depending on the appetite for new risk given the aggregate risk for the area, the underwriter can then decide to proceed or not. Making this decision without the support of spatial data would be nigh on impossible.
For assessment of likely claims, GIS systems offer similar strong business advantage. Plot the area of impact of the riot or flood, and the system is able to sum up all current exposure in that area. This assessment of the aggregate risk can also include items not typically post coded such as bridges and public toilets which large property insurers.
GIS solutions have already proven their value to the insurance sector. Some of the systems are out of date or not integrated to underwriting systems to support real time decision making. With legacy modernisation imposing a major drag effect on insurers IT budgets, GIS solutions may have to wait some time to attract the correct level of investment.
In the coming quarter, Celent will publish a report on GIS vendors in the insurance sector.
The use of telematics devices in insurance have been around for several years, with companies like Aviva (UK) and Progressive (US) taking on the pioneer role in early 2000s. But there have been many dissenters. One large insurer told me that they didn’t see the point in telematics offerings and it would cannibalise their current motor book. And so it seemed whilst top motor insurers own majority of the market, we would see little change in Europe.
Then along comes that pesky driver of change – regulation. The European Commission has already mandated new cars manufactured in Europe have to have a black box device. This is part of a pan-European initiative called e-Call which links up emergency services across the region. So if you are holidaying in France, in a new car, and have an accident, your telematics device makes a call into the local emergency services. The idea being that quick responses to accidents will save lives.
Earlier this year, came another directive. The European Court of Justice ruling on banning the use of gender in insurer pricing is to come into effect in December 2012. The furore over this announcement from the insurance industry is understandable and this will require a fundamental change in how risk is underwritten. The immediate affect is the women will see their premium rise, by as much as 50%, which has consumer groups up in arms.
And so we come back to the topic of telematics. The convergence of these factors make telematics more viable if not the only way forward for motor insurers.
The industry has learnt much about telematics since the early part of the last decade. There are a variety of ways to gather data from black boxes, and not all data is required to be kept and stored. Consumer attitudes, whilst still varying regionally, seem less hardened to the idea of being monitored. There are several companies offering turnkey solutions to insurers – from installing the device, collecting the data and providing the analytics.
Perhaps the biggest shift is from what has been called pay-as-you-drive to pay-how-you-drive. The first model based on utility pricing can’t take into account the difference in risk between young and experienced drivers. It doesn’t take into account the different risk of country roads and highways. Behavourial based pricing is the evolution from the utility model. It’s now the right time to review telematics. Niche brokers and insurers will look to use this proposition as a market differentiator, and the large motor insurers will be required to review telematics to be able to meet impending legislation. Celent plans to write more on this in the summer.