I was buying a train ticket during my commute the other day when something strange happened: the payment terminal asked if I wanted to purchase a micro-insurance policy for the ride.
Since the train was arriving in 10 minutes, I declined—but it got me thinking about all the new products that have hit the market recently.
There are many forms of ticket insurance, for everything from musical shows to passenger travel.
There’s warranty insurance for consumer electronics through firms like Squaretrade.
There’s the pizza insurance now offered by the Domino’s chain. Takeout customers can return pizzas rendered inedible for any reason (the website lists everything from “a stranger sneezed on it” to “it was run over by a bicycle gang”); the store will provide a free replacement.
There’s by-the-hour flight insurance for drone operators from providers like Verifly. Customers can purchase on-demand coverage with a smartphone for commercial or recreational drone flights, with a minimum duration of one hour.
Such new offerings are always interesting, and not just because of the universal appeal of pizza. These new products, which I’ll call “agile coverage” for ease of use, are often made possible by the Internet of Things. In most cases, agile coverage can only exist where data about the insured asset is affordable and accurate.
For example, per-minute auto insurance can only happen if it’s possible to track the location of a particular vehicle at a particular time. Additional data, like the number of passengers in the vehicle or whether its lights are turned on or not, is also nice. Likewise, per-hour drone insurance requires that some trusted party be able to track a drone’s location and velocity in real time, or very close to it.
There are many consequences to equipping our devices with new sensors and turning them into rich sources of data. Among them is the development of autonomous or “intelligent” devices—think self-driving cars, which would be impossible to develop without high-quality, real-time data from sensors.
The advent of these intelligent devices will have huge implications for many traditional insurance carriers. When two self-driving cars collide, who is liable—the car owners, the vehicle manufacturers or the software developers? Likewise, who would be responsible if my “intelligent” self-driving lawnmower ran over your crashed drone?
There’s no industry-standard answer to questions like these—yet. But one of the most likely scenarios is of huge concern for traditional insurance carriers.
In that scenario, “intelligent” devices, rich data captured through the Internet of Things and shifts in asset ownership drive a broad transfer of liability from today’s insurance customers to device manufacturers, designers, and other industrial players. These organizations are forced to price the cost of covering these liabilities into their business models, so life might not get any cheaper for customers. But if this comes to pass, many conventional carriers will see the core of their business models rapidly lose relevance, and their position at the negotiating table shift as many small customers are replaced by fewer large ones.
Of course, that’s not the only possible future. The technologies driving this process also create many new opportunities for conventional carriers to find new revenue streams and forge partnerships with unconventional industry players that drive value for the customer.
It’s up to each individual carrier to understand that disruption is on the way, find the opportunities for growth hidden among the threats, and take the necessary steps to manage both.
To discuss all aspects of the future of insurance (pizza-related and otherwise), reach out to me here.