Technology encompasses every aspect of the insurance experience and is allowing carriers to shift their focus from being strictly reactive in the event of a loss to being proactive to help prevent or mitigate a wide range of risks. There are benefits to adoption for both insurers and customers and today we will examine some of the top areas where technology is transforming the insurance industry, what implementation looks like for consumers and carriers, and discuss some of the risks and opportunities it presents.
Transcription:
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.
Patti Harman (00:08):
Good afternoon. I'm Patti Harman. I'm the editor in chief of Digital Insurance and I am so happy to be with you this afternoon and to talk about what's going on in terms of digital transformation in 2024. So technology encompasses every aspect of the insurance experience and it's allowing carriers to shift their focus from being strictly reactive in the event of a loss to being proactive to help prevent or mitigate a wide range of risks. There are benefits to adoption for both insurers and their customers. And today we're going to examine some of the top areas where technology is transforming the insurance industry, what implementation looks like for consumers and carriers, and discuss some of the risks and opportunities it presents. Joining me is Hemant Sarma, senior vice president and head of the Internet of Things for Chubb, who's going to share how insurers and Chubb in particular are using different types of technology to identify and mitigate risks for their policy. Policyholders, thank you so much for joining us today, Hemant.
Hemant Sarma (01:19):
Thank you for having me, Patti. It's exciting to talk about IOT or internal things that it's known, I guess, and how sensors are really changing the paradigm of insurance we underwriting claims and everything else. We'll, we'd excited to talk more about that
Patti Harman (01:37):
And that kind of segues into my first question, which is technology is transforming every aspect of the insurance industry, and I'm wondering what are some of the areas where you've seen the greatest adoption of technology over the last two to three years?
Hemant Sarma (01:55):
Right, great question. So as you've been talking about, the IOT has been a significantly enhanced over the last few years because of better connectivity and better quality of sensors and insurers are taking advantage of that in terms of preventing risk and risk selection and risk assessment. So before I go any further, let me frame out what IOT means and what these sensors are. So iot consists of sensors that are connected to the internet where the data is stored and analyzed digitally and with basically little or no human intervention. So think about an Apple watch, think about even the automatic braking in cars that are pretty common nowadays. Think about the water leak sensors that are very much in the focus today. So all these capability really changes. As I said earlier, the paradigm of insurance carriers and brokers to move away from what we are good at is repair and replace towards this thing about call predict and prevent, right? So can we be more predictive? Can we be on predictive and risk selection or even preventing a loss from that for that matter, right? So it's really changing how we look at technology and IOT being one of the key technologies that has seen a lot more adoption. Again, as I said, telematics is a great idea. Great, great use case. Drones have been in place for years and years now, and then we are putting out water lots and lots of these leak detection sensors. I'd love to talk more about that as well.
Patti Harman (03:42):
Okay, that sounds great. With so much technology adoption, I'm wondering what types of technology do you think had the most potential for adoption by both insurers and even their customers say let's just say over the next 12 to 18 months and why?
Hemant Sarma (04:01):
Right. So we've seen adoption again in quite a few different areas. So focusing on property for example, we've seen leak detection sensors, whether it's automatic flow-based solutions or sensors for homeowners to pure simple sensors that just detect and give you heads up, right? We've seen that a lot of that. We also seen adoption of iot sensors in what we call wearables. So whether it's again a watch or somebody that wears at the time of working that gives a worker ideas or hints around lifting the right way of lifting and bending. So thereby preventing a musculoskeletal injury that can happen. We are also seeing a lot of adoption of sensors in the machineries. A lot of machines come equipped with sensors and devices and the benefit of that is it could give a lot advanced warning to the machine before it breaks down. So you could use preventative maintenance as a factor.
(05:15)
And we are also looking at can we include that benefit as part of an embedded insurance coverage. So that's an adoption moving towards a policy benefit as well. Inland marine and Taft of cargo is a big use case. You've seen a lot of that. A lot of cargo gets spoiled during temperature in the ocean or in transit. So a lot of these use cases are really coming into light. A lot of carriers, including Chubb, have proof of concepts around each one of these, but the most adoption we are seeing in terms of all that is water leak detection and it's a big problem for the industry.
Patti Harman (05:58):
It is. And I can't wait to talk about that a little bit more. You mentioned earlier about the internet of things, but can you explain how the use of this technology is changing the risk landscape for insurers now?
Hemant Sarma (06:14):
Right. That's a great question. As I look around the spectrum of the entire insurance value chain, when I look at the buyer, whether it's the insurance buyer or it's the risk manager buying it, then I look at the customer interactions that happens between the carrier, the buyer as well as a broker. Then the other example I just using was regards product, new product development, embedded insurance, and then finally related to service and claim. So let me double click on each one of those. So for example, if you have a better protected risk from a risk buyer perspective, they have less losses, let's say where water leak or fire losses or whatever they are obviously will be more attractive customer to the insurance company, to the broker, right? Because they're much better with the risk from that point of view. So essentially improving the risk profile of the customer is one of the big value factor benefit of in the insurance value chain.
(07:20)
So when you move to the interaction with the customer, with adopted technology and with immediate notification and the data flow between a customer to a carrier or to a service provider, a lot of value added services can be included in that. To give you an example, we are looking at deploying emergency restoration vendors services as in when a leak is detected in the building. So essentially somebody's calling in and saying, checking in, Hey Mr. Customer, we just noticed the leak. Is there an issue with that? Can we help you? Can we do something with that? So kind of bringing into a reactive mode, more predictive mode rather than being reactive mode. So the other piece is around we send risk engineers to inspect, for example, for a building or boiler machinery, which is required by jurisdiction. We can now look at immediate data that's coming in and that can really help.
(08:27)
Instead of sending somebody every six months or three months, you have immediate data on your fingertips on your app or your dashboard or you call it to be able to convince to connect with the buyer or the property manager or the facilities individuals to say, can we help you with something? So the interaction is really starts to improve a lot more than what happens every three months, every six months. Typically that's traditionally that what happens, right? And when product development, the great example, what we are seeing today is having sensors embedded in a boiler, for example, a boiler that has sensors embedded in it is a much better scenario because you now have a signature on the boiler. If it's taking a long time to heat the water for example, or if it's say the vibration on the boiler, it's a lot more than typically what you see now that can trigger a preventative maintenance solution around that.
(09:26)
And along with that, we can also look at including that coverage when we provide a missionary breakdown policy. So it's kind of becoming important parcel of our offering. While we can see the sensor is now giving you more information, it's a much better risk. And customers are looking at and saying, you know what? I'm a much improved customer from a risk mitigation perspective as well. And finally with claims, as I said, we can roll a restoration vendor truck, we can create additional value added services based on the alert that we are getting as a carrier, as a broker as well as a service provider. So I see the adoption, the benefit across the entire insurance value chain.
Patti Harman (10:11):
I can tell and it makes so much sense to do that. And I'm not sure if you know, I came out at 20 years in the disaster restoration industry, so I understand the process and how all of that works. And that kind of leads into my next question, which is one of the perils that creates tremendous damage and is very costly for insurers and homeowners involves water damage. I think so often people don't realize how just that tiny drip or a toilet running incessantly or whatever it is, how much damage that can create. And I'm wondering, can you tell us how big of a problem is this for the industry in terms of maybe the cost of damage, an average claim, that sort of thing, and some of the other factors that come into play there?
Hemant Sarma (10:59):
Yeah, I mean, before answering the question, I'll give you a little bit of background on my background right now. I ran Chubb's real estate and hospitality practice for 10 plus years, and every time I would see a submission from a broker, one thing that really stood out was water damage claims and whether it's within the deductible or outside the deductible. And that became my motivation to explore what solutions are out there technology wise that can be brought into the insurance industry to solve that problem. So water damage is a big problem and we've termed it to be the new fire, if you will, because you don't see that many fires. So water, a damage we call is the new fire. It is the second most common cause of loss in the property book today. It's how big it is. I mean, when you look at our own book, for example, 20% of the losses historically in terms of dollar number and in terms of number of claims are coming out of water damage losses.
(12:05)
And it's staggering. And some industry stats that I've seen maybe dated, but I've seen numbers approximately $20 billion. That's how big the problem is. And I also call this death by a thousand cuts. What I mean by that is the losses within the deductible as you can imagine, but somebody has to do something with it so the losses doesn't get reported to the carrier, but you still have to deal with it, right? As a property owner or as a customer, you have to deal with it. And so that's just, I would call it the physical, that damage of the loss. What we are also looking at is let's say UN higher rise building and a multi-story building in New York City, for example, if you have a leak in your unit and you are leaking upon somebody else, then now you're creating a liability loss as well. And then on top of that, we've seen the scenario, the example in Florida where the homeowners association also triggered their loss on their DNO policy or an ENO policy. So it literally goes beyond just the physical damage of the loss. You've got a liability environment, you've got a could trigger DNO loss because you as a homeowner association did not take care of the property that you should have. So all that is really triggering all that attention across the entire different lines of insurance, if you will.
Patti Harman (13:37):
Very true. It's amazing how interconnected all of these different facets are. Last December, I had the opportunity to visit Chubb's Risk Engineering Center, and I was just fascinated by how you're using technology so proactively, and I was wondering if you could explain how Chubb is leveraging IOT to mitigate water damage and other risks. It goes into so many different areas there.
Hemant Sarma (14:11):
Yeah, it's an exciting place. I mean, whenever go visit the risking center, I feel like a kid in a candy store. So I think it's around 12, 15,000 square feet of state-of-the-art facility. We test a variety of solutions there, whether it's wearable, whether it's leak detection, slip and fall camera-based ai. And we also, I don't know if you had the chance to see it, we also have the fire lab where you actually burn stuff and then we put water on it and extinguish it. So it's really fascinating from what we do out there. It's a place where we do train our engineers, our underwriters, we bring individuals from outside to train them. We run variety of different courses out there. And as I said, we try, we test and approve a variety of technologies out there, whether lead detected detection, ergonomics assessment, we do that. We do an infrared thermography out there. We test the telematics devices out there. So we do testing, we do training. It's fascinating from what we've been able to achieve with that. It really becomes a place where we incubate and test a proof of concept for new technology out there and then we bring it out to our customers, to our engineers to adopt them. So yeah, we have really taken tact taking that to the next level. I'm glad that you were out there.
Patti Harman (15:46):
I am too. It was just fascinating for me to kind of see so many different areas there. And one of the things as I've been covering the industry, many insurers are starting to really see the value of partnering with InsureTechs to develop the technology that they need so they can get it into the hands of their policy holders. And I was wondering if you could talk a little bit about how Chubb has approached development and collaboration and what impact has that had for both you and your policy holders?
Hemant Sarma (16:21):
Yeah, it is been a pivotal journey for us and it led to the acquisition of our own iot company. And maybe if I'm not wrong, I may be wrong, but Chubb is perhaps the only primary carrier that has own our own iot company well built in. So prior to that, our approach was to adopt different vendors to use them and see how their solutions work. Since 2021 when we acquired Stream Labs, stream Labs is based here where I'm sitting today in Smyrna outside of Atlanta. It's an original Cuban manufacturer. They do manufacture some products. I'll love to show you that as well in a second. So the fascinating thing is that it uses a very patented, I actually not very bad patented proprietary technological called ultrasonic. And it's been used in gas pipelines in large oil pipelines. So it's a miniaturized version of that. So let me show you for a quick second. This is, I dunno if you can see it. This is the fiat shape product. This is what we call the control and it's size of a football and it goes into the main waterline coming inside the house. It has a ultrasonic flow-based technology built into it. And so if you're not home and it detects an unusual flow, it automatically shuts it off. So you don't have to home, you don't need to call your neighbor and go check on the house. I mean it happens all the time.
(18:08)
So what it's out there, we have deployed thousands of these since the acquisition. Prior to that, the company that was part of a plumbing company had been doing this for a while. So part of the acquisition was we have a team of engineers, we have our own more than 24,000 square feet here of location that again, you're deploying all the technology build ourselves. By the way, the other thing is that we are not relying on buying it from outside and white labeling it. These are homegrown solutions that have been built from scratch. So we are proud of what we have going on. This week we launched a brand new product, it's called a scout. It is a picture of the scout. It's a sensor base that has temperature, humidity, and in water leak detection. And the unique thing about this particular sensor, it could be standalone in your home, you put under the sink and the bathroom or toilets.
(19:06)
But the unique thing about this sensor is that it can direct the control, which is the automatic shutoff valve that, hey, I'm detecting water or I'm detecting dropping temperature. Go shut off the water. So that is unique because I don't believe anybody else is doing that. And it came out of the use case we saw in winter storm last year. We see a lot of those losses came in because the home was heated, for example, but the attic wasn't, there was no heat in the attic, typically there's no heat in the attic. So the pipes in the attic froze and when they thought it started to leak. So this sensor will start telling the homeowner that, hey, temperature's dropping, go take some action. And if nobody's home, which is quite possible and we have multiple homes, then it tells the control automatically shut off that go shut it off.
(20:02)
So you may have some water coming out, but it would not be a catastrophic loss. So we just deployed this very excited about that. And we see the use case in condos in high-rise in New York and in all the other places. It's going to be very interesting journey from that point of view for us. So we believe that with the team of engineers and the 70 plus patents global that we have, we will continue to expand the footprint of the streamlabs go beyond this water leak. There's so many other use cases of sensors that we can use. Very excited about that.
Patti Harman (20:41):
I'm sure you are. I'm thinking about the practicality of using that given the cold snap we had last week across the entire country and how many homes and businesses and things that were affected. So my next question kind of leads into what you're talking about and I'm thinking back to I had friends who had a beach house and they learned that their pipes had burst because there was water coming out of the front door and the neighbor saw that. So let's talk a little bit about water damage and how most people, they just don't realize how much water damage, how much damage water can create or how quickly that small leak can turn into a 20,000 or even a 200,000 gallon loss that encompasses multiple floors. And you've mentioned that earlier. Well, let's talk a little bit more about how some of these sensors work and particularly how they've been adopted by businesses as well as residential property owners. But I think when I was there we were talking about the losses in a commercial setting like colleges or hospitals or something like that. But can you just walk us through some of these use cases?
Hemant Sarma (21:59):
Sure. So we have installed thousands of sensors today and in pretty much every other occupancy we call it. So think about anywhere you've got pipes running in the building and a four wall and there's a need for something like this. So hospitals has been our biggest use case, starting with one of the hospitals in Boston that had a massive water damage loss while the doctor, the physician was operating on a patient, water was pouring in from the ceiling. And Dr. Ron, who actually shared the videos with us, it's on our website somewhere. It's fascinating that he had to stop and obviously continue with move somewhere else. Since then, a hospital has been a big use case for us. And good thing about the hospital, the good usable hospital is that they would prefer a standalone system. They don't want anything to connect it to their control room because they have a lot going on there.
(23:05)
So hospitals being healthcare, hospitals being use case real estate is big, especially high-rise buildings, but there's offices or multifamily dwellings from that point of view, financial institutions are big in terms of, they've got very unique storage of books and documents that they need to protect from humidity. So that's a big use case for them. Life sciences, very interesting. We had a scenario where the janitor was upset about this little refrigerator was rattling a little bit. So he pulled a plug on it and we lost $2 million of stem cell research in it. That would've never happened if there was a sensor in it and somebody else would've said, Hey, there's something going on. So life sciences is a big use case for some of these technologies out there. That's just on the commercial side. On the homeowner side, again, the water leak detection is a big factor.
(24:06)
Interestingly, almost every other insurance carrier on the homeowner side do provide premium credits for adoption of these technologies. So Chubb provides up to 8% premium credit on the device. That's the control, the automatic shutoff, while a lot of other carriers do that. So they're trying to incentivize customers and homeowners to adopt this technology out there. And we are trying to do that same on the commercial side as well, so that we kind of give some incentive to the customers to adopt the technology to get used to it. And the user experience is important from that point of view. So yeah, we've seen adoption across literally everywhere around in all the occupancies and then more to come, as I said, there's so many other use cases with sensors doing construction for example. We find a lot of these losses come at the course of construction similar to an operational building. We have been really seeing higher adoption over the last few years as well, more and more happening.
Patti Harman (25:15):
So along with that adoption then, what kind of return on investment are you seeing with the use of these leak sensors? Because it really is so important and all you need is a hot water heater that bursts and leaks or some of the other things. So how are you seeing your ROI on that then?
Hemant Sarma (25:34):
Yeah, that's a question we get asked pretty much every time we go pitch a solution to a buyer who's investing, looking to invest money into this technology, they'll say, why should I do it? So there's several aspects of this one, obviously, as I said, the benefits on the insurance side, whether it be a lower deductible because you have a water mitigated building or property or lower rate on your water leak detection or water rates out there. And then on top of that, water consumption is also a factor in the ESG world today, right? It's a big factor. Lead certified building have to have certain water mitigated announcements into the building. So from environmental perspective, we see a lot of adoption. People are looking at from ROI perspective water consumption, water usage is big. We do have the app that we provide to our customers has a historical use case for use of water for the last three months.
(26:42)
We actually tell you how much water you've used so people can get a sense of water usage from that point of view. I think the biggest use case I think about also is with regards to the benefits to the insurance companies. So what I mean by that is today there is no rating engine relative to water mitigated building. It does not exist today only because I think we are trying to catch up to that. So we have fire rates, a fire mitigated, fire sprinkler rate, and a non-fire sprinkler rate. There's no rate for specifically for water mitigator building. So the data that's coming in, one of the goals for us at Chubb is to use that data, build the ROI on top of that and be able to create a water rate, a water mitigate rate on the building so that you can see a lot more adaption. So at the end of the day, ultimately the consumers will see a benefit of the adoption of technology. They'll see the benefit that it does take time to catch up with the losses, but they'll definitely see loss reduction and that will come from attending to the alert to be able to automatically shut off something from that point of view. So there is a multiple use cases around that we feel, and part of the challenge for us is to highlight that goal and conversation like this is really helpful.
Patti Harman (28:10):
Wow. What do you think well is next for for iot in the insurance industry that as we're beginning to see a little bit more adoption of some of these different devices?
Hemant Sarma (28:23):
Yeah, I would say there's so many other, I would call it different use cases that we like to see out there to be used. And I try to, I'll give you an example. While wearables a great solution for worker injuries or workers working in a warehouse, we could use cameras and the technology behind it. I wanted to use the word ai, but yeah, it's AI generated solutions out there that could really make the solutions broader, more adoptions out there for more and more workers and consumers out there. And then slip and fall is another area. What I find could be a great use case with camera-based AI because you can find cameras everywhere. We go to a shopping mall, there's a camera out there or a retail store, the primary use for security purposes, but with cameras and the benefit of giving alerts to housekeeping or the maintenance people could be a big benefit of using, seeing more and more use case of that. So at the end of the day, I feel how technology can either reduce the loss or reduce the severity of a loss or make it a more attractive to the insurance community, receive any of those factors of features that trigger it automatically be a big use case for everybody. So that's where I see more adoption happening as well.
Patti Harman (30:03):
So is there any type of iot device that you would just love to see develop because of the type of impact it could have on the industry?
Hemant Sarma (30:13):
Yeah, that's absolutely true. I mean, there's a lot to be covered there. As I said, there are sensors and the way I think about IOT and sensor, the more impact it could have on a wider population. Let me give you an example of that, right? We've seen wildfires happening a lot more frequently and we are seeing that in a lot of ways. We are trying to figure out and fix that problem. But we've seen sensors adopted today where it could give heads up to do the fire department or the local municipality out there that there's a smoke stack detected and based on technology, it could say it likely to become a big fire. So any technology that has a broader implications that are adopted across the board as impacting more and more people, I would see, I would like to definitely see that happen. We are not there yet. Definitely we're taking the tip of the iceberg here trying to make that happen. But clearly those are things I see when I think about iot and sensors, where else it can go. There's so many use cases, so much can be impacted with it. And again, we are just the beginning stages of that.
Patti Harman (31:33):
So we've covered a lot in the last half hour or so, and I'm wondering if you have any closing thoughts on maybe areas to watch regarding technology adoption or just what you expect to see going forward.
Hemant Sarma (31:48):
Yeah, one of the biggest challenges, again to overcome and we do a lot towards that, is regarding customer privacy. In looking at how are you using your data and what data do we capture in the first place and how the data is stored and transmitted and how the data is utilized. So data security, data privacy are the two big elements there and a lot of governmental influences are happening out there. GDPR issues will be out there. California has come up with variety of different list solutions out there. So we see that as, I definitely see that as be getting people comfortable with what data is used, what it is captured. So that's one big factor of that. And then on top of that, cybersecurity is big, right? We have heard stories about how iot devices can be hacked and what it could happen to that.
(32:48)
So we take a tremendous amount of precaution, whether it's a sensor or it's a device that has got sensors based into it versus all the data that's secured and safe, trying to prevent that from happening in the first space. So more and more adoption will happen as well as in when we can overcome some of those challenges out there. So any device that we manufacture, we want to go through those testing, the security penetration testing we call them, we want to do that as well. So yeah, definitely those are factors that come into play. Hopefully we overcome those factors to have more adoption out there.
Patti Harman (33:31):
Alright, thank you so much for joining us today, Hemant, and to share a little bit about how Chubb is using and adapting new technologies. I want to thank our audience for joining us as well and we hope you'll come back for next month's transformation forum. We talk about how auto, when we talk about auto insurance and the impact of technology, thank you all. Have a good afternoon.
