Pizza, films and music downloads are just some of the rewards that Carrot, a car insurer, offers to responsible drivers.
Insurers have been using telematics to assess customers’ driving for some time but Carrot, along with a number of rivals, is taking this a stage further by using mobile phones rather than “black boxes” in cars to compile data. It also uses mobiles to deliver both immediate feedback on the customer’s driving and — if warranted — the rewards.
Insurers are increasingly under pressure to embrace new technologies, says François Robinet, chairman of Axa Strategic Ventures, as the main components of the industry — capital, dealing with customers and data — are all candidates for disruption. A poll by PwC, the professional services firm, found that 69 per cent of insurance chief executives are concerned about the speed of technological change.
of insurance CEOs concerned about speed of change in technology
Tech initiatives under way in the industry vary. Legal & General is using retina scanning in India to speed up the process of applying for life insurance products. The retina scan immediately brings up personal data that can be used to fill in online forms. Elsewhere, insurers are using information on Facebook and social media when assessing claims. In China, Zhong An (a joint venture between Alibaba, Tencent and Ping An) sells insurance covering individual ecommerce transactions.
Insurers are also using their own data better to price new policies. Aviva has discovered that its pensions customers tend to be safer drivers, so it offers them motor insurance discounts.
committed by insurers to venture capital start-up funds
Many initiatives are developed internally, often in company “labs” devoted to new products and services. But insurers are also looking externally. Some of them, including XL Catlin, Axa, Aviva, MassMutual and Allianz, have set up dedicated venture capital funds to invest in start-ups. Globally, insurers have committed more than $1bn to such funds. This month, Axa Strategic Ventures helped to lead a $55m funding round for Blockstream, which is developing blockchain, or shared ledger, technology.
For many, the real prize technology offers is the opportunity to reduce claims costs. Telematics in motor insurance is one example. If customers have incentives to drive more slowly, there should be fewer accidents. Similarly Discovery, a South African health insurer, offers incentives to customers who work out, tracking their activity via wearable devices. In the US, Beam has extended the principle to dental insurance with bluetooth-connected toothbrushes and an app that tells customers how well they are brushing.
Technological change has also created a new line of business — cyber insurance. According to Verizon’s data breach investigations report, there were almost 80,000 security incidents affecting companies’ data last year. High-profile attacks on businesses such as Target in the US and TalkTalk in the UK have created concern among executives — and an opportunity for insurers.
In the US, where companies have an obligation to report data breaches to the authorities and customers, insurers often cover the costs but they are still nervous of cyber risks. “[They] are not quite sure of what their exposure might be to a cyber attack,” says Andrew Coburn, of risk analysis specialist RMS.
Nevertheless, the market is expected to grow strongly. “Globally, gross written premium for cyber liability is about $2.5-$3bn,” says Glyn Thoms, of brokers Willis Towers Watson. “But that could be $25bn by 2025.”