Telematics is only the tip of the iceberg in terms of the changes technology will deliver to the insurance business. For property/casualty insurers, the technology represents a shift from a “reimbursement” model to a “loss-control” model of risk.
That's the view of Fred Cripe, senior advisor to PwC and a former EVP of Allstate Insurance Company. In a new interview posted at the PwC site, Cripe talks about the implications of telematics, such as customers agreeing to tracking devices in their cars in exchange for potentially discounted rates.
Telematics is just the latest development in the “Internet of Things,” in which sensors and devices will be feeding data to decision-makers on a widespread basis, Cripe says. “With the Internet of Things, sensors, communications technology and analytical power now make it feasible for insurers to offer loss control on an individualized scale for large numbers of customers. This capability extends to homeowners insurance as well. There are now devices that you can attach to pipes in your house that will let you know in minutes if a leak starts anywhere in the house. Also, you can plug a device into an electrical outlet, and it will let you know when a short circuit is likely in a particular circuit in the house.”
A closed-loop system using sensors, real-time feedback and predictive analysis of behavior data is shifting the P&C business from a “reimbursement” model to a “prevention and loss control” model, Cripe says. There's actually nothing new about this model, he adds, except that instead of just humans providing advice on safety and prevention, sensors and devices can provide data to back it up.
Telematics is now a working example of technology-enabled loss control at work. And, the lessons being seen with telematics can help with planning similar services for the future. For example, right now, only “about one percent of auto insurance carriers are using telematics,” a number Cripe expects to eventually skyrocket as both companies and consumers get comfortable with the technology.
Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.
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