PUTTING PREDICT
AND PREVENT
INTO ACTION
Predict and prevent has been much discussed as the future of insurance. But even as climate-related claims continue to mount, and real-world use cases prove how data and predictive analytics can significantly reduce losses, there is still more talk than action. Uptake among consumers and businesses has been slow, with concerns about upfronts costs, potential obsolescence and privacy still weighing on adoption.
‘To develop loss mitigation at scale, we need to go beyond self-selection bias,’ said Drew Doleski, Connected Home Product Strategy Director at Homesite Insurance. He urged ‘radical transparency’ from the industry about data privacy and how investment in safety equipment will impact premiums.
‘We need to make sure that the value exchange is very apparent or we will forever be stuck in single or low double digit adoption,’ said Doleski, adding that Homesite has a ‘litmus test’ that documents should be understandable by a 6th grader.
The increasing granularity of data means there are more opportunities to engage policyholders because risks, and the advice on how reduce them, can be personalized. Flood data, for example, no longer generates binary ‘high hazard’ and ‘low hazard’ zones but can instead drill down to building by building risks.
‘Data wise, we are in a different realm than we were ten years ago,’ said Derek Lynch, Chief Underwriting Officer at ReThought Flood.
By sharing these data insights, carriers can empower consumers to protect themselves. This can be a sound investment. ‘For every US$1 invested in flood defenses, you can reduce $5-$8 of losses,’ said Lynch. ‘That’s an amazing return.’
So what are the next steps in implementing predict and prevent models? Drew Doleski, Connected Home Product Strategy Director at Homesite Insurance, considers three key themes:
These opportunities are available across multiple lines, from auto to property. However, capturing these opportunities requires carriers have the capability to turn the ‘petabytes and petabytes and petabytes’ of data flowing from connected cars, wearables and sensors into actionable insights. This, said Levi Stacey, Product Principal for Telematics at Nationwide, will require insurers to ‘leverage scalable cloud and edge computing’.
Edge computing – with data cleansed, filtered and modelled at source – will help with latency and make data more manageable for underwriters and other business units to act on.
‘We should be doing more and more at the edge until we get to a point where it’s not beneficial anymore,’ said Bipin Chadha, VP of Data Science at CSAA. ‘But nobody knows where that line is right now.’
Further ahead, machine-learning models embedded in intelligent sensors could collaborate to improve decision-making and unlock new use cases. Connected cars, for example, could communicate and act together to prevent accidents. ‘This is cutting edge,’ said Chadha. ‘How do you federate multiple models and get them to collaborate to solve problems?’
There are barriers to operationalizing edge AI. ‘There’s a long road ahead, possibly ten years or more, for the rest of the ecosystem to evolve to leverage these technologies,’ said Chadha.
As IoT, edge computing and AI converge to predict and prevent ever more risk, insurers will need to rethink business models.
Many of the products and services we have offered as value-adds are increasingly becoming non-negotiable risk management in underwriting practices. There remains a big challenge to make sense of the economics of the IoT.
WENDI BUKOWITZ
VP, DIRECTOR OF STRATEGIC INNOVATION, THE CINCINNATI INSURANCE COMPANIES
Part of the rethink of business models that IoT demands will involve partnerships with third parties that sell the smart devices, sensors and vehicles that make up our connected world. ‘We need to build a tech stack that allows a multitude of different devices and providers to plug in,’ said Drew Doleski of Homesite. ‘You must be able to manage vendor agnostic data.’
These partnerships may involve ‘as a service’ solutions that embed predict and prevent into the fabric of daily life. And with insurers already starting to make the use of these technologies a prerequisite of coverage, particularly when it comes to young drivers in auto lines or households in areas at high risk of climate extremes, it’s essential the solutions are transparent, engaging and affordable so that nobody is denied the cover they need.
The discussions about how to monetize a Predict and Prevent strategy look set to continue – and Insurance Innovators USA is where you can be part of the debate.
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