Predictions of Christmas past

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Dec 23rd, 2015

The speed of technology change is presently both amazingly fast and disappointingly slow. This paradox arises from seemingly huge shifts in technology regularly occurring over the last decade and a half but slow realisation of these in industry.

Of late I have personally felt that things aren’t moving quite as quickly as I expected. Since we’re at the end of the year and the holidays are a great to reflect and review how things have gone I thought it worth going back a little and looking at some of Celent’s predictions from 2012.

The image below summarises some of the predictions Celent used to highlight just how much change could occur in the following eight years. How much of it has proven to be accurate?

Celent Predictions

Printing human organs with a 3D printer was a topic of active research in 2011 and the topic of a TED talk. Still a topic of active research and still some years (possibly decades) until we’ll be getting replacement printed hearts and ears. That said, doctors in the US did save a two year olds life with a man made windpipe in 2012.

In this case the ambiguous commercial space flight referred to the then-likely space tourism although the efforts of SpaceX have pre-empted the space tourism industry by some years. SpaceX was the first private company to complete a delivery to the International Space Station in May 2012 and made a delivery beyond Earth’s orbit in 2015.

Widespread use of 3D printing was another suitably ambiguous phrase. In 2015 every home certainly doesn’t have a 3D printer although the devices are widely used in prototyping activity and are regularly found in increasingly popular innovation labs. The price of 3D printers is coming down to the level where other devices such as home printers and microwaves started to become popular – but the killer application is perhaps missing.

Social commerce referred to the seemingly inevitable integration of retail directly into popular social platforms. While retail websites have adopted social features Facebook has not surpassed Amazon in terms of retail, indeed the leading social networks are still advertising platforms and not retail platforms, despite rumours over the last 3 years social networks still don’t have payments integrated in. A prediction firmly not realised.

As regards the battery technology the insta-charge batteries are still not here, whilst they are an area of active research. Similarly the idea of highways capable of charging electric cars via induction is still at concept stage – with the adoption of electric cars having been slower than some expected with the popularity hybrids. There’s still time for these predictions to come about but they feel more like a bet than a certainty now.

As regards drones executing simple tasks this is already being widely discussed, regulated and piloted in multiple countries. The concept of pizza deliveries by drone – a particular favourite of mine, has already been piloted in multiple cities.

Smart energy meters and grids was an early expression of the Internet of Things technology beyond telematics in cars. This is increasingly finding its way into mature markets with multiple insurers in both the US and Europe offering insurance based on devices in the home.

Finally, the crash proof car – the topic of Donald Light’s report on the end of auto insurance. It felt far too early to say driverless cars would be ubiquitous by 2022 so this was a safer bet. While it’s a strong statement to say a car is crash proof we have already seen the rise of testing of autonomous cars as well as multiple car manufacturers underwriting the activities of their vehicles while in autonomous mode. We are already seeing manufacturers literally willing to bet their vehicles won’t be responsible for crashes on todays roads.

Perhaps then, things are moving swiftly and Celent’s wild predictions of 2012 aren’t that far from the mark. Also of comfort to me is how members of the insurance are directly involved in some of these initiatives, where they are relevant.

If you get time to think back on the year, I would be curious on your views. Has technology change sped up? Slowed down? Surprised? Disappointed? Where do you think it will head next?

Celent has it’s thinking cap on already and some of these topics will be discussed in our events, What if…. and Celent’s 2016 Innovation and Insight Day, although we’d surely love to hear your views.

California DMV flashes yellow light for driverless cars

Donald Light

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Dec 17th, 2015

As a long time resident of the Golden State, let me say that the words “fair,” “judicious,” “California,” and “DMV” just don’t appear together in the same sentence. But, I’ll break precedent and say that the  California DMV’s new draft regulations for driverless cars are (overall) fair and judicious.

The regs begin to address the knotty social and legal issues of safety and liability. Manufacturers and a third party tester must certify the ability of a driverless car to meet specified safety and performance requirements. Operators (who used to be called drivers, back in the day) must be able to take control of the car and will be responsible for all traffic violations. It looks like the larger issue for insurers and trial lawyers of “who gets sued” is not directly addressed by the draft regs.

Additional parts of the regulations include:

  • Special licensing for driver/operators
  • Obtaining driver/operator consent for collecting information “not necessary for the safe operation of the car” (hello interior-facing dashboard cams)
  • Ongoing reporting requirements by the manufacturers on the vehicles’ performance and safety
  • And, sign of the times, the vehicles must be able to detect and respond to cyber attacks

Some manufacturers may be (privately) impatient. But the reality is that these regs provide a path for broader deployment into a litigious and worried society of technologies still in the R&D stages.

What if… the insurance industry didn’t innovate?

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Dec 14th, 2015

As a techy with long hair and a beard when I stand up and speak on technology an audience generally expects a futuristic view of the world and a call to action. Of late I’ve been more tempered in my view. Having talking about IoT, telematics and drones for five years now Armageddon hasn’t come, the sky above the insurance industry has not fallen and to be honest, many insurers are still running as they did five years ago with little challenge to their bottom line. In short, in many parts of the globe, insurance hasn’t changed.

Have I changed my mind? Only regarding the timescales. For those that are looking – the proverbial canaries are falling. The signs can be seen in multiple countries globally that real change is coming, whether it’s the rise of price comparison websites, the rise of data aggregators, the rising population of connected sensors – whilst the industry hasn’t changed, the world it is sitting in is gently coming to a boil.

Whilst the timescale of change to the industry itself is uncertain the possible impacts to the insurance industry won’t be random. That is the driver behind our What if event in February. A key part of event is to inform the audience about the possible scenarios that might befall the industry, to offer tools to consider the impact of these scenarios on their business and current investments. Our hope is to invite the attendees to consider how they would respond and if their current investments are preparing them adequately.

Back to the title of the blog – what if an insurer didn’t innovate? An innovation agenda is one response to change and opportunity – whether that’s a change in competitor activity, customer expectations or change in distribution. Other responses could be to increase the agility of the organisation, finally address those legacy niggles or to simply improve the companies research capability to better keep an eye on what changes are coming. What if isn’t solely about innovation, but rather a look at likely scenarios and ensuring your organisation is prepared.

If you haven’t registered yet, the event is in February in London and you can view the agenda and register here.

For a list of other benefits have a look at Mike’s blog from earlier in the year, along with a reveal of the magical venue.

$13 million investment in social insurance signals disruption

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Dec 10th, 2015

Will a sharing economy model work in insurance? The announcement about the start up Lemonade highlights the challenges that social insurance (also called peer-to-peer insurance) faces. A Celent colleague, Jamie Macgregor attended a panel on social insurance propositions at FinTech Connect Live in London this past week (see Jamie’s blog post). On the panel were leaders of three such companies, Sebastian Herfurth, co-founder of Friendsurance, Steven Mendel, CEO and co-founder of Bought by Many, and Louis de Broglie, President and co-founder of Inspeer.

These companies operate as brokers, managing the transaction between the end consumer and insurers. They offer either a deductible sharing scheme or a pooling mechanism to gain price discounts. The panellists spoke about their common challenges — sustaining growth and educating the consumer about an alternative approach to insurance. It remains to be seen if any can achieve critical mass. Of the three, Friendsurance is further along having started (way back!) in 2010. (See Celent report: Friendsurance: Challenging the Business Model of a Social Insurance Startup — A Case Study)

Similar brokerage models have also been adopted by Guevara and Tongjubao. These companies seek to apply social insurance to more complicated lines of business – automobile (motor) and life, respectively.

The Lemonade announcement stated that it will expand the social insurance model beyond sales and service by taking on risk on its balance sheet. They report that they have applied to be an insurer in New York. This will be an early, significant test given that state’s past regulatory reputation. However, the company has some strong arguments to make. They can point out that sharing increases transparency and aligns the interests of an insurer with their consumers. Additionally, the sizable initial capitalization will positively influence regulators.

These alternative approaches are good news for the industry as they challenge the traditional, sometimes adversarial, relationship between insurer and insured. The ability of Lemonade to secure $13 million in initial funding from veteran venture capitalist firms (Sequoia Capital and Aleph) is a serious indication of industry change.

Personal musings from one of the world’s first InsurTech incubators

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Dec 8th, 2015

Last Friday (and flowing into the weekend), I was privileged to take part as a mentor in the final selection process for the first “InsurTech” cohort of the StartupBootcamp’s accelerator programme targeted at the insurance industry. This programme claims to be one of the first specialist “InsurTech” accelerators to be run globally by an independent firm. The programme has attracted pretty impressive backing from the industry with firms like Admiral, Allianz, Ergo, Intesa SanPaulo, LV=, Momentum, LBG/Scottish Widows, Tryg and UnipolSai taking partnership roles.

To give you an idea around the scale of achievement of those who got through, the process started with circa 1.3k interviews, 250+ applications, 42 short-listed ideas and then whittled down to just 18 finalists…from which just 10 could be accepted onto the program. These ten firms will now go on to be mentored during their start-up phase, have their ideas challenged and further developed from people within the industry and independent entrepreneurs and, in doing so, build the network they will need to both attract funding and find new clients.

Over the two days that I spent with the finalists, there were a number of themes that came through the submissions. Here are my personal musings:

Data featured strongly across nearly all of the initiatives. Having access to either unique sources of data (whether from a home move, from a travel plan or from connected world) and a model for assessing underwriting risk appeared to be a winning combination.

Digital engagement, aggregation and ‘robo-advice’ are hot topics. What I found most interesting was the focus on underserved markets, whether targeting prospects with poor health records, in difficult to reach populations around the world, or educating Gen-Y/Z of the value of insurance. Addressing underserved markets profitably is a big issue that the industry often struggles with. A fertile area if tackled well. What impressed me the most, however, was the passion and sense of purpose displayed by the teams in fixing something that just feels ‘plain wrong’ to them.

The Internet of Things (IoT) is going to change the industry’s client engagement experience and liability profile. Five initiatives related to the IoT were submitted. Three were focused on wellbeing, one on the connected home and one on drones.

Although it didn’t quite make it into the final ten, I found the drone initiative fascinating. With Amazon and others itching to launch commercial drone services at scale, this is a market that is set to grow. Drone insurance could be the next ‘fleet’ or ‘auto insurance’ (as was pointed out by my fellow mentor Charles Radclyffe). Certainly, the current risk models in use today are immature and unlikely to be adequate for a world where autonomous vehicles are delivering packages across our heads 24×7 (assuming the regulator allows it). Sadly, the drone initiative didn’t quite make it into the final ten. Personally, I wonder if it’s just maybe a little too early, but perhaps still one to watch for the future?

As with anything IoT related in insurance currently, each initiative will face a shared challenge. Although the proposition concepts may be compelling, the instrumentation rate of adoption will ultimately set the pace for growth. The IoT is still in its infancy across the industry and convincing prospective clients to share their instrumented personal data is no small undertaking.

Data permissions are a growing concern for both individuals and regulators. It was refreshing to see some of the propositions pitch personal digital vaults as part of their propositions, whether for managing data from connected devices, personal wellbeing or personal belongings. Although it’s not yet clear how the market will develop for these services or how they will be monetised beyond a simple subscription model, services like these may suddenly find themselves in the limelight once regulators step in to protect personal privacy.

Regulatory compliance. It wouldn’t be the insurance industry unless there was at least one idea focused on regulatory compliance. What if you took all of your regulatory compliance reports produced, aggregated them, and then analysed them? A really simple idea without a huge amount of cost involved.

It was a refreshing couple of days. I look forward to seeing how their ideas and propositions develop over the next year. If you’d like to know more about each of the final ten, details can be found here.

Kanban Insurance will replace UBI as we know it

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Dec 1st, 2015

The Internet of Things (IoT) has evolved and matured to a point where pilots and programs are already in place around the world for every major line of business: Auto, P&C, Life and Health.

The most mature market unarguably is auto insurance in part because sensors have been in place for many years and the auto industry is driving the use of telematics for its own sake, not just insurance.

But it is not just telematics; vehicles are becoming smarter. Collision avoidance and secure driving aids are more common now, and not only in luxury cars. At the end of the road we already know that vehicles will evolve to the extreme of being smart enough to become autonomous.

A Celent Report “A Scenario: The End of Auto Insurance” by Donald Light back in May 2012 predicted the end of auto insurance as we know it. Donald’s prediction is now a reality.

Smarter vehicles make smarter (and safer) drivers reducing significantly the driving risk. Autonomous vehicles take away the driving risk almost entirely (we still have the risk of the system being hacked or that there is a flaw in the programming).

All this is happening while telematics driven auto UBI hasn’t yet become the norm in the insurance industry; and already has an expiration date. So should we continue to invest in auto UBI programs to cover driving risk knowing it will inevitably be disrupted? Is there another approach to consider?

Some of you may be familiar with Kanban; a method (and term) used in manufacturing, first introduced by Toyota, for a scheduling system for lean and just-in-time (JIT) production. Is a system to control the logistical chain from a production point of view, and is an inventory control system.

I believe insurance is changing in a way it will be lean and just in time also; think of “Kanban Insurance”, driven by IoT and digitally delivered and serviced.

Kanban insurance is not limited to auto insurance but can be applied across all LOBs, moving away from the traditional concept of insurance pre-defined products where the customer chooses from a limited set of options (and within an existing LOB), to flexible insurance solutions which are a bundle of coverages, regardless of LOB.

Kanban insurance is digitally sold and serviced, tailored to the specific needs of each customer with the solution being created automatically on the fly. Kanban insurance allows customers to easily opt in/out and connect devices and sensors to activate the insurance and monitor in real time the changing aspects of the risk.

Imagine a solution that is created on the fly based on your specific needs and will follow your daily journey. A solution that for example could cover your commute, whether you use public transportation, Uber/Lyft, an autonomous vehicle you own or share, or that you decided to drive the old fashioned way (manually). This solution will activate a set of coverages for your home which is in autonomous mode as you left the house (as nobody is at home and sensors are active) which are different coverages to the ones you have when people is there; while your life insurance coverage and insured sum (and premium) automatically adjusts depending on what driving mode you are using (or if you are in a train, cruise or air trip).

Kanban insurance makes more sense to me than just UBI programs. Insurers that agree with my view should focus on the implications and requirements to be able to support this approach. These will include core systems functionality, digital solutions, data integration, analytics, machine intelligence, 3rd party partnerships, and deciding on infrastructure and data ownership.

 

You’ve got email, but not from your life insurance company

Colleen Risk

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Nov 20th, 2015

When was the last time you received email communications from your life insurance company? For most of us, the answer is never. Contrast that with the last time you received email communication from your bank, your financial advisor or your favorite retailer. Life insurance is so far behind that it is not even in the e-delivery race.

E-delivery allows the customer to elect to receive documents such as contracts, letters, account statements, and billing notices via email rather than paper mail. Generally, a notification is sent that a document has been posted to a secure website, or, in the case of general notifications, mailed directly to the policy owner’s email address.

Areas of opportunity for e-delivery in insurance span all processes, from field administration to customer acquisition to claims. The benefits of using e-delivery are typically derived from reducing scanning, mailing, and printing, lessening process complexity, and increasing automation and systems integration. These drivers lower costs, reduce cycle times, and increase customer and agent satisfaction.

I recently published a report titled, You’ve Got Mail Two Decades Later, Why Are We Still Talking About E-Delivery Rather Than Doing It, where I interviewed 17 life insurers about their current and future e-delivery plans. Although e-delivery can bring multiple benefits to life insurers, it has been poorly adopted. In fact, only 25% of the surveyed insurance companies are using e-delivery.

Areas of focus within the report include:
• Progress of e-delivery.
• Targeted documents for e-delivery.
• Benefits and challenges associated with e-delivery.

There are a number of challenges life insurers face when it comes to e-delivery, including legacy systems, policy holder adoption, and agent engagement. However, other industries have found a way to overcome these challenges. It’s time for life insurers to set aside the excuses and find a solution.

Life insurers have been left in the e-delivery dust and need to run with haste to catch-up.

“Hamilton” the hottest ticket in town – great timing!

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Nov 9th, 2015

CBS’s 60 Minutes ran a story recently about the hottest new Broadway musical – Hamilton (go to the 14 minute mark). It turns out that some of the research for the show was conducted at the site our Innovation and Insight Day – The Museum of American Finance.

This biography underscores why we chose the Museum for our next Insight and Innovation Day (to be held April 13, 2016). The segment talks about Hamilton’s numerous accomplishments:

“…a penniless, immigrant, orphaned kid who came out of nowhere and his achievements were monumental…he creates the first fiscal system, the first monetary system, first customs service, first central bank…”

Without these innovations, the modern economy as we know it now would look very different.

Anyone working in financial services today is aware of the challenges we face responding to changing customer expectations and new technology opportunities. Vast sums of money and time are being spent on innovation, looking for answers. However, Celent’s research shows a widely held view that the financial services industry cannot innovate very effectively.

Hamilton graphic nov 2015

So how do we improve?

The theme of our Insight and Innovation Day event this year will take inspiration from Hamilton’s work and use it as a guide for our future efforts.

By the way, if you want to go to Hamilton while at the Celent I&I Day, I suggest you get your tickets now. It’s the hottest ticket in town.

Free advice for auto manufacturers: how to sell the experience of driving an autonomous car

Donald Light

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Nov 3rd, 2015

I rarely, actually never, give advice to automobile manufacturers because I am an insurance technology analyst, and not an automotive analyst.

But as more and more and more auto manufacturers make announcements about their plans to get autonomous cars on the road, ready or not—the dire implications for automobile insurance cannot be ignored.

So on occasion I do find myself thinking about what autonomous cars will mean for manufacturers. In particular, since the marketing of cars emphasizes the driving experience so heavily, what will the automakers do when all they can offer is a riding experience?

I mean a rolling home office, or family room, or man cave, or walk-in closet only has so much appeal.  And yes I know that all these cars will be totally connected, but still how many touchscreens will entertain a car buyer/driver during the morning commute?

So I do have an answer: virtual reality! Not just any virtual reality, but a virtual reality that makes the passenger in an autonomous car believe that he or she is actually driving that car—with appropriate physical artifacts (steering wheel, pedals, brakes, dashboard, etc.); and a choice of scenic and challenging routes.  If Disney can create rides that make people feel like they are accelerating, de-accelerating, steering, and cruising, why not GM and Toyota?

As mentioned, this advice is free. But if any manufacturer reading this post is so inclined, please send a large check to Celent (not to me, alas). Thanks.

Scary thought: What happens when the worlds of startups and insurers collide?

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Oct 29th, 2015

Scary044Accelerators, incubators, hackathons and labs, oh my! There have been an increasing number of partnerships between insurers and start-up technology companies in the past year. It is an exciting time, full of possibilities and I don’t mean to pour cold water on the enthusiasm, but…

What happens when fast-moving startups meet governance-heavy insurers? When faced with a joint decision, how will professionals who have spent a career avoiding risk reach agreement with their partners who seek out risk? To what degree should action plans be coordinated and how is that done if one group is using an agile development method while the other prefers waterfall?

Do these differences really matter, or will the incentive to deliver something really cool power through such differences?

It is time to ask this question, along with what is, and isn’t working, and what actions will improve results.

Celent is excited to partner with Silicon Valley Innovation Center to assess the current state of innovation partnerships in insurance. We value your views would like to invite you to participate in a survey. Leave your email and I will send you a summary report.

The goal of this survey is to accelerate insurance industry innovation / transformation by identifying effective partnering methodologies and processes. It specifically focuses on the relationship between incumbent insurers and start-up firms. It takes under 10 minutes to complete.

Hope you will add your views:

Click here to start