Lighthouse #20
4 Keys to Out-performance: Certain practices see some businesses capture a performance premium of more than 13 times over peers - enjoying vastly superior profit margins and revenue. These are the findings of a PwC survey of more than 2,000 business leaders in the US, the UK, Germany and Australia. PWC labels these companies as "quadratic" companies who do the following:
1. Reduce friction, or transaction costs—the time and resources needed to do business, both internally and across business ecosystems and service partnerships.
2. Engage business ecosystems and service partnerships to create value by improving data flows, generating privileged insights, enhancing customer value propositions, and freeing up resources to more sharply focus on the company’s own differentiating activities.
3. Approach key initiative and investment areas comprehensively by pursuing them beyond a threshold level of maturity or evolution—for instance, moving entirely to cloud-native technologies as opposed to migrating only certain aspects of the business to the cloud.
No doubt in my mind these insights are relevant to insurers. There is a lot of friction that can be removed in transactions with customers and through the supply chain. Item 3 is an interesting, as I sometimes see insurers "finishing a project" and then moving onto the "next project". Increasingly, however, certain areas require ongoing investment and nurturing - eg digital - and really should be viewed as Opex not Capex. Source: PWC
Research Finds Challenges Ahead For Digital Insurance: An independent think tank has found that people face a range of significant hurdles in engaging with digital personalisation and customisation as it may lead to a worse price and/or less cover. The David Hume Institute (DHI) looked at the way in which financial products are increasingly being built around the transfer of risk from the institution to the individual. This is called the Great Risk Transfer for short. In insurance, it takes the form of personalisation, at the moment in pricing but ultimately in the policy itself and the services derived from it. That trend is central to the digital future of insurance. This research gives insurers some things to think about when weighing up products, pricing and distribution. Nice discussion on the reallocation of risk back to the individual as insurers strive for more personalisation and risk based pricing. Begs the question as to what is the role of pooling in insurance? Moreover, will the pricing sophistication arms race invite government intervention to ensure accessibility and affordability? Source: Ethics and Insurance
New Mobility Models Will Require New Insurance Models: Good read from McKinsey Center for Future of Mobility. It covers four key trends and provides some good use cases: autonomous driving; electrification; connectivity and shared mobility. If you are in insurer, you should definitely be factoring these trends into your strategy work and thinking about how your business model will need to evolve - distribution, pricing, product and claims….pretty much the whole value chain. Source: McKinsey
Insurers Must Keep an Eye on Bigtech: Businesses with customer reach need to be included in the disruptive set. Bigtech definitely have reach - and some credibility with consumers. This article looks at Twitter’s, Apple’s and Google’s forays into Financial services. This article is well worth a read. Source: C-Innovation
Speed Critical to Satisfaction: Some useful insight's here about customer’s satisfaction and expectations of insurance claims handling. Headlines:
> 70% of insurance policyholders said they were either satisfied or very satisfied with how their insurance company or agent handled their claim.
> one factor more than any other drives satisfaction - speed of settlement! The longer it takes to settle a claim, the less satisfied that policyholder will be.
> many insurers have exploited the omni-channel opportunity - "low hanging fruit"
> 75% of executives said AI and machine learning can bring “considerable” or “great” value eg much greater automation. Yet only 44% of executives say they are advanced in their use of AI, automation and machine learning
Source: Accenture
Arity and Toyota Partner on UBI: Mobility and data analytics company Arity is teaming up with Connected Analytic Services (CAS), a Toyota affiliate. The partnership aims to provide driving data from connected vehicles to car insurers on behalf of vehicle owners to enable them to access usage-based car insurance (UBI) products. The partnership with CAS will bring connected-car data from Toyota and Lexus vehicles to the Arity platform. Arity’s platform offers insurance carriers data insights to utilise for pricing, underwriting and product design. CAS’s platform currently provides direct access to national carriers seeking to leverage vehicle telematics data. The collaboration with Arity will expand this access with additional carriers.
Another good development for consumers and one which encourages and/or challenges insurers to evolve their business model. Source: Business Wire
Some Research on Distracted Driving: Two useful reports from the US providing some valuable insights into driver behaviour, and in particular, mobile device usage while driving:
Arity: From 2019 to 2023, Arity observed a 30% increase in the average amount of distracted driving per mile. There are significantly more distracted driving occurrences per mile than pre-pandemic levels. Source: Arity
Cambridge Mobile Telematics: Phone distraction, has continued to rise. February 2022 was the worst month for phone distraction in the US since the start of 2019. Drivers spent one minute and 38 seconds on average distracted by their phones for each hour of driving. This is a 30 percent increase over February 2020, the last month before the pandemic began. Source: CMT
Data Portability and Telematics: Quite an interesting article on telematics and data portability - which throws up quite a few questions. Increasingly new cars are becoming connected, and there are a variety of after market plug in solutions, as well as the mobile phone. They all can collect data on how, when and where a car is driven. Globally, more people are opting for telematics solutions.
Is there a role for a telematics exchange, focussing exclusively on data management, data normalization and standardization? A well-managed exchange could help provide insurers with efficient access to data, and further fuel the shift to solutions based on usage.
A potentially tricky one for insurers. Those insurers that have solutions may be reluctant to share the data they have collected with other insurers. Of course, insurers aren't the only ones collecting data - e.g. the motor vehicle manufacturers are also collecting it. And no doubt insurers would like access to that data. IAG recently argued for a standardised framework for access to key auto data. -Linkedin
Ultimately this probably comes down to the question of whose data is it anyway? There is a strong case that it is owned by "the driver" or "vehicle owner". We have seen the introduction of "data rights" regimes across many countries - in financial services and in Australia these rights also extend to telecoms, energy and insurance. These provide rights to the consumer to shift their data from one entity to another. Should this type of regime apply to telematics type data? Source: Digital Insurance
Cameras for Fleets: Commercial trucking insurtech Cover Whale is partnering with Netradyne, a SaaS provider of AI and edge computing solutions focused on improving road safety for commercial fleets. The partnership will involve Cover Whale committing to deploying thousands of Netradyne’s advanced Driver-i dual-facing dash cameras, which enable fleet operators to promote safer driving and identify problematic behaviours behind the wheel.
Another good application of tech to help reduce risk......Certainly many opportunities in commercial fleets and likely to get real scale here before we see the same in private auto - the economics will drive it. Also, the obligations of fleet managers to improve safety and educate drivers are likely to be a factor. Source: Insurtech Digital
Climate risk platform Zesty.ai has raised a $33M: Zesty states that it partners with half of the top 50 US insurance carriers in the P&C sector, with named partners including Amica, Aon, Berkshire Hathaway and Farmers Insurance. Zesty's platform draws multiple data points (including satellite imagery, sensor data and weather reports) to help insurers determine a property's risk of events (eg bushfire, weather event).
This insurtech vertical - which triangulates data from multiple sources and overlays smart analytics - is one that I remain bullish about. It has the potential to bring so much value!
The dynamic is an interesting one, where several early stage business like Zesty.ai, Arturo and Tensorflight are making big strides - and seem to have the jump on insurance incumbents. I find this interesting, with data, underwriting, risk insights etc considered by many as a key barrier to entry and a source of value generation. Of course, these new players are making it far easier to access powerful risk insights, and having had the privilege of working with some of these players, the improvements and opportunities are material both in terms of insurer and customer outcomes. Source: Biz News
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