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Moving insurance beyond Financial Services

My neighbor and I have the same car insurance from the same carrier.  We pay
the same premiums. He drives his car every day. Due to my travel schedule, I
hardly ever use my car. He loves driving fast. My friends say I drive like a
granddad. Are our risk profiles the same? Clearly not, but it is often too
complicated and expensive for insurers to get enough detailed information about
the risk profile of the insured objects, our behavior, our health, and our
properties to reflect that in the premiums or service they provide. 

This is changing. New technology is emerging that is making it feasible, and cheap to connect to insured objects, as well as our health.

It is not just about being able to assess risk better and make premiums more fair, it is also opening up new customer service opportunities. 


Insurers (and non-insurers) of all kinds are exploring business
models that give them greater contact with the customers and objects they
insure. Once based simply on statistical estimations, risk management can now
incorporate very specific information about these customers and objects. In
addition to the usage profile, car insurers can track automobile locations, speed,
and safety – enabling them to offer other services.. Health insurers can
monitor how frequently their customers use the gym or their level of fitness.
Home insurers can identify weak points in security systems or other hazards.


Strengthening the customer connection

Such capabilities are made possible by telematics
and mobile technologies that have become more sophisticated and less expensive.
They are being employed by new industry entrants such as Google that already
have strong connections with their customers. After the 2011 purchase of, a British online insurance aggregator, Google recently bought
Nest Labs, a producer of smart thermostats and smoke detectors – opening a potential link between home
insurance and home monitoring systems. No announcements have been made, but
Google (and many other e-commerce players) are rumored to be working on new business strategies that could disrupt
the traditional insurance model.


Consider too, Discovery – a South African insurer that offers
programs for monitoring fitness, safety, and other risk factors. Customers who sign
up for the programs and meet certain health and safety thresholds can qualify
for lower premiums as well as discounts on a variety of products and services.
The focus is not on financial service but protection and health services.


In fact, such innovations are now increasingly expected by many
customers, especially millennials who are used to this in other industries. To
manage risk more profitably and, more importantly, to provide new services,
insurers must rethink old business models, consider adopting new types of
connectivity, and leverage the information this connectivity produces to provide new services..

Making the most of Big Data

But all the huge new data that will be generated from these new models is only useful if it can be collected, managed, and used.
This requires a technology platform that can receive and readily aggregate and
analyze huge volumes of data. More than half (53%) of companies surveyed in a recent SAP Performance Benchmark survey
report a big gap between their access to Big Data and their capabilities for
analyzing this information.[AS1]


Advanced technology for gathering and analyzing large volumes
of data can achieve this as well as help them meet new regulatory standards for data security, customer
privacy, and operational transparency. A robust platform can help insurers
address the standards of individual countries and make the necessary
adaptations as these standards evolve.


The move to new business models is beginning.
With the proper support, insurers can turn this trend into a big opportunity. 

Insurers will increasingly need to view insurance as being more than a Financial Service.
Successful insurers will increasingly view their business as providing protection and improvement Services in a much wider sense.

My neighbor and I may not be paying the same premiums for much longer.


The following links provide additional information on this subject:



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