Emerging Technologies in General Insurance

Emerging Technologies in General Insurance

The Celent webinar yesterday, Emerging Technologies in General Insurance, was very well attended and there were more questions than time allowed. Thank you to everyone who was able to attend and who contributed. If you didn’t get a chance to join us, the recording is posted at http://www.celent.com/node/29767

Below are the answers to the questions that were still outstanding at the end of the session:

Q: Is there such a thing as an Insurance Carrier Fraud Maturity Model?

· No, but great idea and don’t be surprised if you see one in the upcoming Celent report on fighting insurance fraud!

Q: For consuming telematics data, is this something that a carrier should do standalone or are there industry schemas such as IBM’s IIW that add value in this regard?

· We have observed a difference of approach between US carriers and insurers in the UK. Typically in the US larger carriers are building out the infrastructure and model themselves to capture, analyse, keep and use customer telematics data. In the UK the preference is to use partners or the vendors of the devices to gather the data and do the analysis on their behalf – sharing the results of the analysis for use by the insurer. It’s worth noting there are already efforts underway in the UK and German associations of insurers to discuss a common format for this data to allow the information to be shared between vendors at time of renewal, although I don’t believe they’re reviewing industry warehouse models such as IIW. There is no one size fits all approach and insurers using various approaches are meeting with success although Celent expects some common standards to emerge for sharing this data between insurers, agents, brokers and even customers should they request it.

Q: What carriers are best-in-class when it comes to Big Data? What technologies do they use?

· Big Data is still more of a buzz word for carriers than reality today. The larger insurers have Big Data programs/pilots underway due to the amount of data that they have. Smaller carriers are considering Cloud options and mid-size carriers for the most part are watching the results of the other two.

Q: Isn’t expense control closely associated with underwriting efficiency? What do you see adoption of emerging technologies wrt to underwriting?

· Expense control covers all insurance functions and processes, as well as the technologies that support/automate these solutions. Analytics have been used by a lot of carriers to create more effective and efficient UW decisions. We expect the use of social data to play a great role over the next 1-3 years with respect to UW, as well as the continued use and maturity of analytics in the UW process and decisioning.

Q: Why hasn’t the notion of insurance focused open source taken off?

· Open source has taken off in many carriers and is in use in varying degrees and levels (operating systems, libraries, ESBs, portals; and to a lesser extent applications). Analysts do not typically include open source solutions in their reports (as separate from other non-open source vendor solutions) for several reasons. First, the analyst process of evaluating solutions starts with a vendor, their profile, their implementations, customer references, etc. Second, vendors often use open source as a component or even a core of their applications that are included in most vendor reports.

· Many carriers prefer working with a vendor rather than developing solutions internally and thus select a vendor solution over open source.

Q: Many of the new data sources create privacy “surprises” when consumers intuit that a commercial organization knows what it knows and puts it to use, even if it benefits the consumer. Policy is of course lagging technologies but it will evolve unpredictably. California has limits on telematics data use, for example. How the insurance industry implements emerging technologies has a public relations component and potential for igniting a very fragmented state-by-state way that data can be used. What does Celent see as far as some uses being especially dangerous from a brand perspective and liable to be shut down by regulation?

· Pricing and eligibility decision rules must be filed with the states. Whether file-and-use or preapproval jurisdictions, all regulators expect that insurers declare these parameters with their organizations. Using any non-approved data source to price or determine eligibility should be strictly off limits.

Technology, innovation and insight in insurance

Technology, innovation and insight in insurance
Last week we held the innovation and insight event in Boston where we discussed creative disruption and emerging technologies and their effects on the insurance industry. Since coming back to the UK a few press releases and blog posts have caught my eye that feed well into this discussion. The first is from Robert Scoble, among other things a technology commentator and blogger. His post, 2012 brings a pause in the disruption sounds contradictory to our view but a quick read of his post provides a great view of the level of change we’ve seen in the last 8 years. Think back 8 years, to the phone you had, the way you interacted with the Internet – with the TV even. In the last 8 short years we’ve seen the birth of the social web, the rise of the smart phone, of apps (and their stores and markets), of gesture based interactions (the Wii and then Kinect were launched in this timescale) and now the IPO of facebook which launched in 2004. The pause in disruption points to a lack of jaw-dropping disruptive technology at the start of 2012 and a consolidation in the industry, a refining of these hugely disruptive themes into concrete business models and a maturing therein. I have to agree. CES 2012 saw bigger TV’s, TV’s with gesture control and further merging of mobile, tablet and laptop devices. Even Apple, the great innovator, presented the iPhone 4S as something they could ship in huge numbers rather than go for massive change. One technology I would watch is 3D printers, which are still gaining ground slowly but mostly in geek and maker communities – given another decade and cheaper prices I think this will seriously disrupt insurance and retail models. For now, we may be waving phones to make payments and having screens we can bend and see through – but consumer electronic developments in the last 12 months lack the technological disruption of past years. This pause is good news for the insurance industry in that makes this the perfect time to step back, take a look at the opportunities and possibilities these great waves of change have on our business models, our products and the way we interact with customers. Insurers across the globe have already made great strides in interacting with customers through social networks and understanding how to leverage them. Insurers are also experimenting with apps, mobile and connected devices. Telematics looks set to enter the mainstream in many markets, where the question is less how should we do it but now which method. It was interesting also to see these articles regarding AXA, repositioning it’s brand as innovative within the UK, making use of social technology and games to educate businesses on the value of insurance. Perhaps not the first insurer, but the articles are indicative of recent and continued investment in this theme from the insurance industry. The recent past – whether you call that 8 years, a decade, two decades – this short time has been an incredible period of change, insurers are already disrupting their industry and Celent contends there is no better time to review how the industry can leverage adoption of emerging technologies to creatively disrupt not only their internal perceptions and process, but the entire market.