Becoming a 24/7 Insurer
Insurance Experts' Forum, July 8, 2014
An informal survey conducted among the tech-savvy in my office (that means my assistant) came up with pretty much the same answer as a recent study by my colleagues at the Deloitte Center for Financial Services: Insurance apps are not yet up there in popularity with Kim Kardashian (the No. 3 free app at the iTunes store on July 1; donít ask me why).
Sam Friedman, author of Mobile engagement: Insurers look to connect with consumers on the go, posits that the industry faces two basic challenges with consumers as it gets ready to move to the next phase in its mobile technology efforts: raising awareness and adoption; and moving beyond the basics like bill-paying to stickier, more frequent interactions.
Telematics offers one obvious example of a way that insurers can increase interactivity with, and importance to, consumers. It has implications for all insurersó not just those in the property/casualty areas currently using telematics.
Telematics can reduce the reliance on certain rating factors that may be hard to explain and often raise the ire of consumer activists while more transparently tying premiums to driving style and distance. On top of that, current telematics use is, so far as I know, limited to offering discounts, not to raising rates on those crazy drivers weaving in and out of traffic on the freeway. So thereís no real downside for consumers. Finally, we may have found the elusive free lunch.
But this is too good to be true, isnít it? We canít just give discounts to good drivers and not raise rates for bad ones and expect to stay in business, can we? Actually, the inspiring truth is this is not too good to be true. While insurers cannot use telematics information to raise rates, there is evidence that telematics can do an even better thing: improve driving habits and reduce costs for insurers.
Thatís a real win-win, but that means being able to communicate with drivers, not necessarily straightforward with the first generation plug-in telematics products. But hereís a better idea: How about using the one thing everybody uses almost continuously ó their phone?
What happens if the phone is used to record information on driving habits and then tell drivers how they are doing in close to real time? As criminal justice experts will tell you, it is the certainty not the severity of punishment that acts most effectively as a potential deterrent. Similarly, it may not be the unlikely event of a traffic ticket, but a more reasoned communication to a cell phone that could help convince a driver not to take that curve quite so hard.
That could just be the start. What if in addition to changing driver behavior by providing feedback, the insurance company app also integrates information on external issues that affect that drive to work?
Instead of a dedicated GPS, I now use my phone with a mapping app that relies on information provided by the community using it to make my journey easier. For example, it tells me if thereís an object on the roadway ahead, if thereís an accident, or if thereís traffic. Think of an insurerís telematics app providing that info, all with the logo discreetly tucked in the corner.
This is not just for property/casualty insurance. My power company now sends me a monthly report comparing my power usage to my neighborsí. Some companies are planning to send their client regular comparisons of how much they have put away for retirement compared to others in similar situations. How about life insurance?
Yes, there really could be a free lunch. But insurers need to move quickly to defend their turf with new mobile services before information technology companies try to horn in. As they tell everyone in intro business courses, Penn Central went bankrupt because it thought it was in the railroad business when it was actually in the transportation business.
Insurers need to embrace being not in the insurance business, but in the business of making life safer and better for clients all the time, which means being there all the time through the use of mobile technology.
Howard Mills is director and chief advisor for the Insurance Industry Group at Deloitte LLP and a former Superintendent of the NY Insurance Department.
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