Lighthouse #16
Curating the best insurance, insurtech, innovation and leadership content for you.
Ron Arnold
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The creation of a thousand forests is in one acorn.
Ralph Waldo Emerson
The Treasury "Quality of Advice Review" is hotting up: In its submission to the Review, Choice has argued for a ban on all remaining "conflicted" remuneration across the advice industry. This includes commissions for general insurance, consumer credit insurance and life insurance.
In it’s submission Choice reports the results of a May 2022, Choice and Super Consumers Australia survey, where they asked people to share their experiences when seeking financial advice. They report only one in three (34%) respondents trusted the financial advice industry to provide high-quality advice about their financial needs. 70% of people said that they do not trust financial advisers who receive commissions. Choice agues that “commissions" create conflicts and the risk that advisers recommend products that are detrimental to clients.
Choice makes three overarching recommendations:
1. Ban all remaining conflicts of interest in the advice industry.
2. Retain the best interests duty.
3. Consider alternative models to financial advice for people seeking guidance.
Accepting there are risks and potential conflicts associated with Commissions, I am unconvinced banning them is the way to go. Commissions have been around for hundreds of years. Commissions exist in many industries - from real estate agents, and motor vehicle salespersons through to appliance stores. One could argue if Commissions are to be banned in financial services, then they should be banned in all industries. Source: Choice
Disruption lessons from Payments: The payments space has been one of those spaces where there has been massive change and disruption. In this Accenture article they look at some of the key lessons:
1. Focus on scale over margins: Some disruptors use digital platforms to serve large markets at low cost with high efficiency. This lets them grow in markets with margins that payments incumbents have seen as too narrow to merit strategic investment.
2. Target neglected customer pain points: Many challengers have found space to grow by addressing customer pain points which incumbent payments players have neglected.
3. Wrap value around the payment: In today’s digital landscape, payments are often about much more than just payments. Some disruptors are growing by wrapping the right combination of value-added services around payments, or by embedding payments into wider digital ecosystems.
4. Compete at multiple stages of the value chain: Disruptors are expanding the horizons of competition in payments by targeting more than one part of the payments value chain. One common approach to this is building products that are sold as white-label offerings through another company.
Some insights there that I would expect to apply to many industries, including insurance. Source: Accenture
Ford and Wejo partner to drive UBI solutions: Ford continues down the path of enabling access to telematics data through partnerships. Some months ago Ford partnered with Verisk. Together, they are planning to deliver “insurance-ready” data from connected Ford vehicles. The aim is to help insurers develop usage-based programs. In addition to the U.K., the service will be available in Germany, France, Italy and Spain. According to Verisk, the agreement will provide insurers with more precise insights into a driver’s risks and allow for the tailoring of policies. The approach requires the driver to give consent, after which insurers will be able to view standardized metrics via Verisk’s Data Insight Hub.
This week Wejo and Ford have announced a collaboration. Wejo positions itself as a Mobility Intelligence business, organizing, and enhancing mobility data to support mobility solutions. Wejo reports that it has extensive and historic and real-time connected vehicle data, including over 76.7 billion journeys to date collected from approximately 13 million connected vehicles.
It is reported that:
"As part of this collaboration, Wejo leverages Ford’s end-to-end data consent process through which the insurance company gains consent from the customer to access the personalized vehicle data such as vehicle location, speed and mileage. Once provided, that consent is then passed back to Ford through Wejo to release the data for analysis and insight. The connected vehicle data (CVD) is then passed back to the insurer to establish usage-based end-to-end car insurance policies that are appealing to the customer based on their safe driving or limited mileage."
One might expect it should see further momentum for usage based motor products - which is presumably Ford’s goal here? Getting UBI mainstream makes the connected car data very valuable.
We are yet to see real momentum in Australia on UBI/connected car type insurance solutions. Andrew Wong at KOBA Insurance is looking to stir it up, but there is little exciting beyond that. Happy to be corrected?
This type of innovation poses some interesting challenges for insurers as the traditional business model for underwriting motor is confronted with new, and superior data, a very different distribution model and new product propositions. Will the likes of Verisk, Wejo and Ford hold the cards in terms of the risk insights? How big a threat is this to traditional distribution models?
Source: ffnews
Ford applies for telematics patent: Ford continues to take steps in the insurance space. In addition to partnerships with the likes of Verisk and Wejo, Ford is now looking to patent a telematics application. Suggest you read the whole article, the positioning of the current insurer approach and the Ford assessment and alternate is most interesting. Here are the first few paras….
“Ford Global Technologies is seeking a patent for a built-in insurance management system in each of the OEM’s vehicles that would collect driver behaviour data to generate an insurance risk value that would be based “at least in part on the context data and the activation of at least one ADAS feature.”
The patent notes that auto insurance premiums are typically reached based on vehicle purchase price, loss experience, and equipment as well as the driver’s credit score and driving record. And sometimes, driver data “may also include driver provided responses regarding active safety features on the vehicle.”
“However, relying on this data is not substantially accurate and can lead to misinformation,…For example, customers may misinterpret, be unaware, or misrepresent certain vehicle features. The VIN may not provide enough details as to the vehicle equipment or vehicle feature breakdown. Further, using a person’s credit score presents other accuracy and security related concerns, the least of which is that such a metric may not be indicative of a driver’s driving behaviour. Such accuracy issues may lead to inaccurate risk and loss predictions, which may in turn lead to insurance pricing that is not commensurate with risk.”
Source: Repair Driven News
Open Insurance opportunities: The insurance industry is facing big disruption. Many insurance providers are looking to digital ecosystems to give them the agility and customer reach they require to thrive in the post-digital era. According to Accenture:
> 75% of insurers expect ecosystems to deliver at least half of their revenues within five years.
> 58% are actively seeking ecosystems and new business models.
> 82% agree that ecosystems allow them to grow in ways that are not otherwise possible.
To unlock the potential of ecosystems and thereby generate strong revenue growth and build sustainable asset value, insurers need to be “open” to open insurance and the role of ecosystems. For traditional insurers, who like to be in control of the value chain, this shift in mindset could be a challenge. Good article and materials! Source: Accenture
Are insurers exploring crypto payments?: According to a recent Deloitte report, three-quarters of United States retailers plan to accept crypto or stablecoin payments within the next two years,. The report also found that more than half of large retailers with revenues over $500 million are currently spending $1 million or more building the required infrastructure to make it happen. Wonder how many insurers are getting ready to accept crypto - not many I am prepared to wager...??? Perhaps an opportunity for some insurtechs to show the way. Source: Deloitte
Artificial labs secures funding for novel SME proposition: Artificial Labs has raised a Series A funding round of £9.5m led by Force Over Mass Capital with participation from existing and new investors, including Mundi Ventures, No.9 and MS&AD Ventures. Very interesting proposition. Artificial’ s technology enables an insurer to accept, refer or decline submissions based not only on the characteristics of a risk, but also its value in relation to a target portfolio. As a result, insurers can realise significant operational efficiencies with the opportunity to use all available data for improved risk selection. It can also support strategic objectives. Source: artificial.io
Cyber insurance with mitigation & recovery support: Chubb and JA Assure, “an insurtech firm focused in Niche markets,” announced the launch of Haxsafe, a cyber insurance portal targeting SMEs. The platform, which is initially available in Hong Kong, Malaysia and Singapore, provides instant quote and bind. The approach is underpinned a platform that provides a risk management solution with pre-loss risk mitigation and incident response services. Pre-loss mitigation services include complimentary access to a password management tool and regular spam tests. The Chubb Incident Response Platform helps contain the threat and limit potential damage to their businesses in the event of a claim and an incident response manager is assigned to the client to help triage issues, develop an action plan and help access specialist vendors to assist with the response. This type of holistic approach - from assessment to mitigation and support with recovery - is the way to go! Source: Coverager
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