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11 December 2017
How will you be buying insurance 10 years from now?
In 10 to 20 years’ time it will not be Brexit, Greece, or the Financial Crisis that will be talked about, but what the 4th Industrial Revolution did for us.
Trips into space, driverless cars, and drones dropping off your Amazon orders will be a normal part of our lives.
The way in which we buy financial services is also changing. In January 2018, we will see new regulation that forces our traditional banks to open their files to Apps that will allow you to view your bank accounts in one place, your Gas & Electricity usage and spend, and calculate the value of your pension and investments in real time.
These new ideas are not only targeted at personal consumers. There are platforms like Funding Options where SMEs can compare the marketplace for finance, and Fluidly which is an intelligent cash flow engine analysing threats and optimising business finance.
Insurance undergoing its own revolution
Over the past decade we have seen the birth of the price comparison websites such as Compare the Market and MoneySupermarket. They have revolutionised our buying habits.
In the background, insurers are changing the way they risk assess you. If you check your credit file you might notice that your online insurers have connected to the credit agencies and likely adjusted your premium accordingly. If you have changed your annual car mileage downwards during an online quote, you may need to reconsider doing this in the future as computers can misinterpret this as a risk you may inflate a future claim.
Insurers are also beginning to recognise a link between life and pensions savings with consumer behaviour. According to Aviva, if you have 2 children and save prudently, you are more likely to take care of your possessions. If you have life and pensions with them, you will be recognised as a better risk and your car and home insurance is discounted accordingly.
Customers who want a simpler buying experience are also benefiting. Shorter online forms and the ability to swipe up and down to test the premium effects of altering your sum insured or policy excess, makes the journey a little more palatable.
But technology is not just limited to the buying experience. It is helping to detect claims and potential health issues. Allianz now fit devices that notify them when a leak or burst pipe has occurred in your home and AIG are pioneering wearable technology that can detect the first signs of heart failure. Similar technology could soon extend to cancer detection.
The Telematic box, now fitted as a condition of many car insurance policies, allows you to track yours or your children’s driving habits, helping you to improve driving and reduce your premiums. TrakGlobal are helping both young drivers and insurers to strike a fair balance between risk and premium. They have also been developing intelligent fleet risk management tools to reduce operational and insurance cost for companies.
Being an insurance company in itself has huge barriers to entry not least because the sector is heavily regulated and capital intensive. However, for distribution channels who carry no insurance risk, the opportunities are immense. The advancements in artificial intelligence (AI), new regulations such as Payments Services Directive in January 2018, our changing lifestyles, and the sharing and gig economy are examples that will lead to unprecedented disruption within the supply chain. Last year £1.7bln was invested in start-ups relating to insurance technology, known as InsurTech.
The driverless car is a much talked about subject and Uber have just commissioned 24,000 Volvos to be adapted. While designed to reduce human error, the challenge will be whether computers can always react like the human brain. Take the scenario of a pedestrian hesitating to cross the road. You see danger and make the decision to slow down - your instincts were right. Can computers replicate the same decision?
90% of road accidents are caused by human error and which is often the cause of workplace injuries. It will be no surprise that insurers will be using data analytics and technology to better determine future behaviour.
Admiral Insurance wanted to use the language used in Facebook posts to judge how a person might drive. Facebook was not comfortable with the experiment, however, insurance experts say that others are likely to try to use data in similarly innovative ways.
With analytics enabling prediction of risk, the hope is that it will cut down time consuming questionnaires and insurers will use technology to push insurance quotes to you even before you have asked.
From a safety perspective, Insurers could use alerts to notify you of the risk of falling into a pot hole or notifications to tell you that several crimes have happened in the area.
Instant and short-term insurance is also going to help reduce premium. Occasional users of cars who park in their garage over long periods will be able to switch their insurance on and off. Or sensors could note when it is parked in the garage and automatically adjusts your daily or weekly premium.
Internet of Things (IOT) is quickly coming into our homes. Devices will be more and more connected and hackers have proved that they can access home devices and cause damage. They have even been able to access the camera and voice recorder within a child’s doll. They could turn the gas on or the heating off, access personal information that you hold in relation to your friends and family and even hold you to ransom. Insurers are now considering adding personal cyber cover to your home cover.
From a holiday perspective, Axa Insurance, has built a blockchain-based product called Fizzy. It covers travellers for the costs of flight delays by connecting its policies directly to global air traffic databases, and as soon as there is a delay, you immediately receive your compensation.
Insurance Technology is never going to excite the consumer, however, it will contribute to more affordable and improved buying experiences.
Those companies that have or are building emotional and trusted relationships with their customers are obvious candidates to benefit from new distribution opportunities. The customer data they possess is extremely valuable when measuring habits and needs.
There are likely to be failures on the way, however, the timing is right for the insurance industry to move from what is largely a paper based sector to a smarter and more efficient operation.
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