Once upon a time, insurance companies were the envy of other industries in terms of the history and depth of their data. In the coffee shops of London, underwriters wisely selected ships to insure based on their knowledge of the captains, ships, routes and cargo. Since those early days, competition has heavily focused on that underwriting knowledge and accumulated expertise of companies and the industry.
The fact that there has been a data revolution is nothing new. Every day what we say, how we shop, where we go, and what our devices do generate new data, creating an ever-expanding sea of information. What is different is insurance’s role. With the exception of telematics in select instances, the insurance industry has been slow to assess, evaluate or utilize the vast amount of data out there. As a result, the industry’s advantage in insights and information on the world around it has lost its edge.
Only in regards to claims information is insurance still the king of data, and that is simply because the underwriters create it. The question then quickly becomes, can claims data itself be enough of a sustainable advantage to keep other competitors away?
In exploring disruptions to industries, one of the things we consider is whether or not the industry has sustainable barriers to help block disruption. These barriers include regulation, infrastructure requirements, and insight.
Insight has been one of the highest barriers that insurers have had because of their years of data. But now manufacturers, service providers, search firms, Internet of Things (IoT) providers, social media outlets, etc. all have the potential to collect more predictive data on an insured, as well as an insured risk than carriers do. This sets them up to be very powerful new competitors in the industry.
Consider these examples: Beam Technologies developed an IoT-connected toothbrush that can tell how well someone brushed their teeth. The company is now offering dental insurance with rates based on the brushing habits of the customer. A new competitor was born and it has better and more predictive information than any dental carrier today.
Michelin Tire uses sensors embedded in its products to monitor their performance. The company has used this data to create tire safety as a service, eliminating tire insurance. These are small cases, but they illustrate the point.
And what about:
- Connected cars that collect driving information
- Connected home devices that monitor the security habits of homeowners
- Equipment manufacturers that know how well the equipment is used and maintained
Is your insurance company ready to compete in a world where it has the least amount information? Might it be time to get more serious about big data and level the playing field before the new entrants come?
Special thanks to Cameron Goldade who helped me with this post.