Picture this scenario: You install a device in your car that keeps tabs on your driving performance — whether you’re traveling within the speed limit, signal before changing lanes, begin breaking at a safe distance before a stop, and so forth.
The device communicates the vehicle data to your life insurance company, then assigns you a score. Securing a high score, an indicator of a superior driver, entitles you a discount on your life policy. A low score, conversely, results in a surcharge on your premium.
Sound futuristic? Actually, it’s already happening in Japan, where insurance companies are among the early adopters of telematics: a branch of science focused on tech gadgets that transmit information over long distances. Case studies showcasing applications of the technology, which have implications for insurers in both the life & health and P&C worlds, were explored during a morning session of Summit Professional Networks annual Insurance Executive Conference, held Dec. 4-5 in New York City.
The talk’s presenter, Mike Fitzgerald, a senior insurance practice analyst at the research and consulting firm Celent, told the assembled attendees that insurers can gain a competitive edge in the market by deploying these and other technologies. But to do so they have to be willing to experiment with new ideas, and to expect failures on the way to success.
“Companies are leveraging emerging technologies that, we believe, are giving them a big advantage,” said Fitzgerald. “These companies are making bets based on their distribution model, product set, and corporate culture about what they think will work. They’re also funding these efforts separately from their usual IT operations.”
Underpinning adoption of the emerging solutions, he added, are rising consumer expectations driven by the “Amazon effect” (the ability to fulfill a transaction with minimal or “optimal” effort); and by the “Internet of Things:” a data-connected world in which everything from clothing to home appliances to retail point-of-sale terminals are linked to a server in the cloud.
Helping to spearhead this technology push is General Electric, which is now WIFI-enabling all of the products it makes. GE dubs the new manufacturing model the Industrial Internet. The data connectivity enabled by the change — transforming dumb devices into smart ones — has big implications for insurers.
“Those of you who write business insurance should do a thought experiment about what the industrial Internet will do to your book of business,” says Fitzgerald. “Ask yourself, ‘What does it mean to insure a business that knows what every machine in the company is doing now?’”
To illustrate the power of the emerging technologies, Fitzgerald showcased Tokyo Marine, which now has several “continuous customer engagement” initiatives underway. Example: event insurance.