The announcement of Allstate’s new stand-alone telematics company, Arity, hints at the insurer’s ambitions to create an added revenue stream by selling data and analytics knowledge to its competitors, industry experts predict.
The Northbrook, Illinois-based company is attempting to enter the very competitive data & analytics market. Early indications are Allstate wants to sell its knowledge to all third parties, including other insurance companies, according to a Bloomberg article this week.
“This announcement shows that leading P&C insurers are not going to be content to have their fortunes completely hostage to a low margin, commodifying business like mass market personal auto,” said Matthew Josefowicz, president & CEO of Novarica. “They are going to look for new services that they can offer based on their extensive knowledge of risk. Whether insurers will buy services from a company owned by a competitor is another question.”
Laura Strykowski, Allstate’s senior corporate relations manager, said Allstate is “interested in having companies leverage Arity's capabilities to serve their customers. This could be other insurers or a host of other types of companies.”
Insurers are only one potential revenue source for Allstate, according to Donald Light, Celent’s director of North America property/casualty practice. The carrier can also sell data to telecommunication companies, banks and retailers.
“Allstate’s intention is to have [Arity] grow substantially as an independent business, to supplement its insurance business,” said Light. “If auto insurance premiums drop over the next five to 10 years, revenue from the new unit could at least partially fill the gap.”
Arity is well underway, with more than 200 technology experts and data scientists dedicated to the unit and hundreds more involved company wide, according to Strykowski. Operations have been primarily established at Allstate’s innovation hub in downtown Chicago.
The venture comes at a time when the general growth of usage-based insurance has slowed due to a lack of value propositions for customers and heavy reliance on premium discount models. Yet, experts believe Allstate’s new strategy can jumpstart telematics again. Allstate’s competitors must now decide whether they will follow the same path or sell other services such as loss control and prevention.
“It will be interesting to see what the reaction will be from the industry,” said Mark Breading, partner, SMA. “Whether they step back and see if it’s successful or say, 'we have to do something like this too.'”
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