Does Insurance as a Service (IaaS) work? The efforts of Insurers are being oriented more and more towards associating auto insurance with services (based on telematics data)

The black box makes it possible for Insurers to enrich their auto insurance value

proposition by adding services built upon data provided by telematics. This is an element

to be taken in consideration when evaluating the overall ROI of a telematics program.

On the one hand, these services represent a way of de-commoditizing the car insurance

policy and are also a source of income. On the medium/long term, this characteristic will

become more and more important because of the de-risking trend in the MTPL business

–due to the technological progress when it comes to security and connected cars. On the

other hand, the delivery of these services is generating a growth in the number of

interactions with the client and it also helps in creating a richer connection between

company and client. This shift in the ways of interaction between client and Company

presents great potential and the evidence for this come from many customer satisfaction

surveys: there is a clear link between customer satisfaction and the level of interaction

with the Company. This is true both for Italy and at an international level.

Motor Insurance Telematics is mainstream in Italy

representing 15% of motor insurance sales and renewals.

In this new service “eco system”, Insurers will find themselves forced to co-compete

(that is collaborate and compete) with different actors which are active in connected car

sector. As seen in the above-mentioned examples, Italy is at the moment one of the most

advanced countries in terms of service development connected to telematics. This

creates the perfect conditions for the consolidation of approaches driven by the

Insurance Companies in a country where blackbox policies have become a mainstream

element (as opposed to niche): at the end of 2014 telematics have represented 15% of

motor insurance sales and renewals in Italy (reaching a peak of 40% in some areas of the

country), as underlined by the picture below based on recent statistics provided by

IVASS.

There are three macro categories when it comes to services:

1. Informational services related to the UBI (Usage Based Insurance)policy,

typically delivered through a smartphone app or a dedicated area on a website.

These services concern: quantification of pricing adjustment at the moment of the

contract renewal based on previous driving behavior; coaching and advices

regarding the style of driving; advices on how to save more while behind the

wheel; gamification approach that allows a comparison of one’s own driving style

with that of other friends. Canada-based company called Intact and Discovery

which is based in South Africa, can be considered among the most advanced

examples that currently use this type of approach. According to recent data made

available by a telematics service provider, 4 out of 5 clients owning a telematics

insurance policy check put their driver score at least once a month. Furthermore,

there is evidence that remote coaching programs can lead to concrete results in

modifying driving behavior.

2. Product offers related to the client’s own automobile - like Discoveryhas done

in South Africa with the Tires or the Allstate Rewards - orinsurance policies sold

“on the go” using data collected from the boxes installed on cars (reverse

geocoding). Tokyo Marine (Japan-based) - together with telephone operator NTT

Docomo - have implemented an innovative way of fruition of the insurance,

proving that impulse “cross-selling” of low-value insurance coverage is a valid

approach.

3. Services related to the customer journey experienced by the owner of a

connected car.

An ecosystem of services for the owner of a connected car

driven by the Insurer.

The services for the connected car

There is a vast array of services that can be developed within the connected car

“ecosystem” and the technology is moving fast. There are new start-ups and innovative

business models popping up everywhere around the world. To cite just a recent Italian

example, there is WoW – a digital wallet created by CheBanca!- which have

integrated a parking payment service called Smarticket.it.

Focusing on services more close with the insurance offer, the value propositions could

be observed on the three stages of the customer journey:

• While driving. Services include services such as bad weather alert, speeding

alert, dedicated concierge and even an alert that is activated if the car leaves a pre-

defined “safe area” (family “control” options for young or old members of the

family). Discovery’s approach in this field is highly relevant and includes an anti-

theft service that signals to the client if the driver has a different driving style

compared to the usual one;

• In case of crash. Here the Italian market is considered to be an international best

practice because of how it has perfected the usage of telematics data to manage

services. Many Companies here have invested in creating a valuable customer

experience by involving partners specialized in assistance. The solutions provided

in case of an incident start with a proactive attitude in contacting the client and -

depending on the gravity of the event - continues with sending help directly at the

place of the incident and takes care of all the logistic and case management

problems that can arise. Innovation is now focusing more on simplifying the

FNOL (first notice of loss) procedure in case of car accidents. One such example

is Ania, Italian Association of Insurers, which has announced for 2016 the launch

of a new app meant to dematerialize the FNOL.

• When parked. Other than locating and recovering the car in case of theft, the

blackbox can send alerts when the vehicle is moved or damaged in any way. This

also allows to actually locate a parked vehicle. There are three Italian companies -

TUA, Cattolica, Cargeas – that have recently launched innovative value

propositions in this direction. One of the best practice on this way is the street

sweeping alert by Metromile.

Matteo is InsurTech Enthusiast, Insurance Thought Leader, Principal in Bain's

Finacial Service and Digital Practice.