Insuretech: The Business of Prevention and Risk Reduction
In the unfortunate event of a road traffic accident, the aggrieved party is left stranded. Critical time is often lost, adding agony to an already painful situation.
But what if the accident itself can alert the insurance company, nearby repair shops and dispatch emergency services? What if your Apple Watch can alert your doctor at the slightest sign of abnormal pulse behavior? What if my empty home could call for help in a technical incident and let technicians in while our family is away on vacation?
These scenarios are slowly becoming more widespread in several countries giving rise to Insuretech.
Insuretech involves the use of technological innovations to redesign insurance models with the motive of achieving savings and driving efficiency.
Internet of Things (IoT) telemetry is just one of several innovations that provide a huge impetus in making all this a reality.
Consider this – when an IoT firm that offers telemetry solutions partners with a car insurance company, the insured (through the policy) has a speed-sensor placed in the car. Every time the sensor notices an uncharacteristic speed-surge, it alerts the driver to slow down and in doing so, safeguards the insured. This collaboration of the IoT firm and the insurance company is an example of the burgeoning ecosystem of Insuretech.
But is it a gimmick? Is Insuretech here to stay?
Revisiting the Purpose of Insurance
The concept is here to stay, but the name will most likely disappear one day as (almost) all insurers will eventually become an Insuretech.
Traditionally, Insurance is about reducing risk. But does insurance really reduce risk, or does it just financially replace the cost suffered from a loss?
The typical insurance advertisement implies this – ‘protect your home against fire’.
Instead, what it should say is this – ‘Protect yourself financially in case your house burns down’.
Although that is also very reassuring, most of us don’t want our homes to burn down in the first place. Historically, there was no easy way for an insurer to monitor, influence or really reduce the risk of an accident or loss. Insurance was just a financial service (as the industry is also called).
Improving Lives with Technology
Slowly but surely however, insurers are moving from the financial world into the physical world through technologies that can indeed reduce risk and improve our lives. As computers are embedded into the devices on our bodies, in our cars, in our homes, factories, boats, etc. it becomes possible to influence behavior and reduce risk.
The more an insurer knows about the real-time context of an object or an activity, the more precise the prediction is of what should happen next.
While IoT facilitates data gathering, Artificial Intelligence (AI) enables faster predictions and awareness of hazardous situations. Also, AI learns as it goes along, giving us advice on how to live safer and healthier lives.
The landscape is bustling with activity.
Lemonade Inc, headquartered in New York City, claims to be the ‘world’s first open-source insurance policy’ and offers insurance to homeowners that is powered by AI and behavioral economics.
Zego, a London-based Insuretech company offers flexible insurance for delivery persons. The list of interesting new Insuretech scenarios is endless.
I don’t think the traditional model of mathematical, financial insurance will ever disappear. It is a robust, resilient, and very valuable model. It will simply be extended and enhanced to include technologies that reach deep into our daily activity that will make insurance more about prevention than just financial protection.
This of course throws up a lot of other questions about privacy and control. (Stay tuned for more on that topic…)
Who says insurance is boring?