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Insurance at the Intersections of Protection and Prevention
Two years ago, this week, UPS tested a hybrid delivery system in Tampa, Florida, where a drone made a delivery from a truck equipped with a helipad. UPS claimed that using drones could save them $50 million each year. UPS is just one of several companies (Dominos, Amazon, Google) that would like to add drone delivery to its offerings.
Whether or not drone deliveries ever become an established part of our culture, and it is likely that they will, there is a lesson to be learned from these trials of new technologies. Insurers should THINK BIG and tear down our traditional walls and views on what defines insurance. IoT devices, sensors and data are going to pick up the insurance industry and transport it over many traditional barriers. The sky isn’t a limit anymore. As the barriers fall, insurance is going to look and act much differently.
When services such as drone delivery have matured enough for liftoff, it will signal victory for an entire ecosystem of contributing players. Insurance ecosystems are likewise poised to deliver their own set of market victories. Insurers leading the shift to a new era of insurance are already experimenting and delivering their products and services in similarly innovative ways. If you are a follower or laggard you need to start preparing now!
IoT, Ecosystems and Property
Insurance is ecosystem-ready. Whether you commonly think of insurance as an industry, a product or as a supply chain, it is a network of contributing components. But IoT is opening up that network to large-scale innovations and improvements that we frequently consider under the umbrella of Digital Insurance 2.0. These innovations will not only enhance what insurance already does, but more importantly, they will rewrite the nature of protective cover through something we’ll refer to as the digital awareness layer that is brought about by cloud-based digital ecosystems. The power of the digital awareness layer is that it can unify, simplify and break down traditional insurance barriers and open the insurer up to all kinds of possibilities … new customers, markets, products, and partners.
In our latest thought-leadership report, Strategic Priorities 2019: Accelerating the Path to the Future of Insurance, most insurers we surveyed stated that open APIs and cloud computing were technologies that were important to their business models (65%-79%). Microservices and IoT technologies were not far behind (40-42%). IoT, cloud-based ecosystems and the digital awareness layer could impact both P&C and L&A insurance at the “intersections” of protection and prevention. Let’s look at three examples.
Intersection One: Property Insurance, Home Security and Healthcare
We are witnessing a widening of the bridge between home security and insurance. What is now a sort of one-lane bridge will someday be a two-way data highway. The foundation of the bridge is the growth of IoT devices and sensors throughout homes and businesses. In addition to sensors (temperature, water, infrared, sound, etc.), we are witnessing the tremendous growth of video surveillance (with mobile capabilities). The home security camera market is expected to grow between 11% and 18.2% annually from 2017 through 2023. [i]
There are several reasons for the growth in the market. Millennials seem to be more security conscious than previous generations. They want more digital awareness. They also want more control over their security. And they want it accessible via mobile devices.
Added to this trend is the approximately 10,000 baby boomers that retire each day. With their retirement comes increased travel, less time spent in their primary residences and more time spent at secondary residences. AirBNB and HomeAway are creating security needs for absent property owners. The residential and commercial security market is also supposed to grow at approximately 11% per year through 2022.[ii]
Today’s IP cameras can transmit clear 1080p images straight through to cell phone apps and network providers. IoT has unlocked the power of the smart home. Google’s NEST, for example, collects the video, plus data from connected thermostats, locks, smoke alarms, windows and doors. Smart home ecosystems, like NEST, are ready to meet insurers’ data needs. The NEST website is even a possible channel for insurance partners.
But the IoT link can now extend the bridge from P&C and Home Security into Home Health. As health awareness technologies arise, there is place for P&C to add value to those who choose to age-in-place. A recent McKinsey report mentions the growth of “Ambient Assisted Living”…combining smart-home protection and connected health services “in an innovative and effective way.”[iii] Property awareness and personal health awareness (aided by IoT and cloud-controlled ecosystems) are growing closer and closer together.
Intersection Two: Property Insurance and Voluntary Employee Benefits
Group and Voluntary benefits are seeing tremendous growth, fueled by high talent demand and employers seeking to expand voluntary benefit offerings in the midst of higher healthcare costs. This is great news for insurers that are prepared to provide new voluntary benefit-oriented offerings, such as accident, legal, disability, pet insurance and identity theft insurance. In reality, there is almost no kind of insurance that couldn’t be offered as a voluntary product through employers or through other member-oriented groups like AARP. MetLife, Liberty Mutual and Travelers are at least three insurers currently offering auto and home coverage to groups.
But, how can IoT and the digital awareness layer play a role in insuring employee groups?
It may help to consider how employers are currently using wearables such as Fitbits and Apple Watches to improve employee wellness. In most cases, employers cannot look at individual wearable data. They can receive composite data and they can design health and wellness programs and communications aimed at correcting issues across the entire employee population.
Wellness, however, isn’t just about health. It is about safety. Employers have a vested interest in keeping their employees safe and employees have an interest in keeping themselves and their families safe. P&C insurers have a better perspective on what it takes to keep people and their property safe than either employers or healthcare providers. They know which vehicles have higher safety ratings. They know the demographics behind texting and driving, drinking and driving and other unsafe behaviors. P&C insurers using IoT, telematics, and data awareness ecosystems, can use what they know to make life safer for employees.
For example, using cloud-based data currently available, P&C insurers can help employees assess the risks of the locations in which they live. They can assist with shopping for safer cars. They can offer insurance for expensive devices, such as laptops, tablets, cameras and cell phones. They will one day even be able to provide valuable guidance on home security and energy use while employees are traveling on vacation or company business. Value-added services such as these are attractive offerings for employers.
New hires are often fresh out of college and they may be relocating from one state to another. They may be highly receptive to a bank of benefits that would include auto and renter’s insurance and other P&C offerings that will help them start their careers off on the right foot.
P&C insurers may also be able to offer data feedback via API to employers in much the same way that employers can now receive group Fitbit data. Employers might be interested in ancillary data such as average commute times, geographic range of employee residences, general driving safety ratings, and even information regarding remote work arrangements.
Intersection Three: Property Insurance and Personal Security via Plug and Play Microservices
Our personal awareness was once limited to our five senses. We understood our situation based solely upon what we could see, feel, taste, hear or smell. The IoT has the potential to add data to our senses, building that digital layer of awareness as our “sixth sense” that can supplement our need for security and protection.
What if P&C insurers expanded their definition of coverage to include the protection of not just property and contents, but individuals? Allstate recently took a step in this direction, announcing the availability of digital footprint protection.[iv] This makes great sense. If we are now able to leave footprints that we can’t see, shouldn’t we be able to control who can follow our tracks?
Once insurers have opened the door to individual and family protection, there are many directions it can take — and some of them can be monetized. Currently, in a digital ecosystem such as Majesco’s Digital1st EcoExchangeTM, insurers can glean property hazard data and turn that information into SMS/Text messages or e-mailed warnings. These are plug and play technologies used in a cloud-based microservices environment. They are built to implement quickly on a digital insurance framework so that new and supplemental products and services won’t need to wait for a complete admin system replacement.
Protective technologies will continue to grow. Using crime data, traffic data, weather information and real-time data from cell phones, cars, and wearables — a whole new set of extended services and new innovative risk products becomes possible. If we add in artificial intelligence, we can predict that Alexa and Siri-like bots will one day serve as friendly body guards, keeping us out of harm’s way with gentle reminders that make us aware of all that we can’t see.
The question now is not whether or not these protective services will become a reality. They will. The question is whether or not insurers will be the ones to bring these services under the digital insurance umbrella — or allow them to be captured by competing industries who don’t understand risk like we do. Will we own the client relationship or will they? As we point out in our Strategic Priorities report, leaders are positioning for the API and platform economy. Is your company ready for all that IoT and ecosystems can provide?
[i] http://www.digitaljournal.com/pr/3656245
[ii] https://www.businesswire.com/news/home/20180814005441/en/Global-Residential-Commercial-Security-Market-2018-2022-11
[iii] https://www.mckinsey.com/industries/financial-services/our-insights/digital-ecosystems-for-insurers-opportunities-through-the-internet-of-things
[iv] https://www.forbes.com/sites/blakemorgan/2019/01/10/allstate-is-now-a-data-and-technology-company-my-ces-interview-with-ceo-tom-wilson/#78f6a96f665f