Transcription:
Valerie Turpin: (
So, thank you very much for coming to our session. Very happy to be here. We are going to start by introduce ourself, Lisa,
Lisa Pires: (
Lisa Pires, I work for Hanover Insurance and prior to that, I've been there for two and a half years. I lead the digital transformation and the automation teams for the enterprise prior, I spent two decades at mass mutual in similar roles, technology direct to consumer etc. So happy to be here today,
Valerie Turpin: (
Martin.
Martin Higgins: (
Hello everyone, my name is Martin Higgins. I'm a senior principal with Aite-Novarica formerly known as Navar. You may be more familiar with that name. We are a research advisory and consulting firm that focuses, I used to say we focused on the insurance market but we focus on insurance and financial services. Now since we were merged with the it group. So, I've been with the company for about four years. I've been in insurance technology, my whole career which is a long time over 25 years in insurance technology. So, at it Navar, I focus in on kind of the intersection between technology and business. So, how do you optimize your use of technology so that it can meet your business strategy, your business goals? So looking forward to the conversation today.
Valerie Turpin: (
Yeah. Thank you. And I'm very Toppin I work at the art insurance and I'm the head of US property. I've been in the property commercial property. Well for 32 years, that's why you can see that I've got papers and they have very nice tablets. So you can see that I'm not on the innovation side, but on the product side, which is going to be one of our conversation and I'm here to ask the questions today. So, we'd like that to be interactive, if you want to do not hesitate to ask questions, comments we really would like also your feedback, there are plenty of expertise into this room. So we definitely looking for what to have a communication and a discussion. So I will start, so 10 years ago when we were at the industry conferences, not slow, w S I N R res and the others internet of things was in all the agendas. I mean, everybody got very excited about it, large insurance company, like ag where making information that they were investing in some companies that was really the burst of the market about risk mitigations claims management risk assessment. So,10 years later, 2022 Martin, can you tell us what the state of the market is?
Martin Higgins: (
Sure. Yeah. So I think your point is a good one. I think if you look back 10 years ago, there was a lot of excitement. The levels of adoption were very low. The understanding of the technology was relatively low. The opportunity though was considered to be significant by the industry. So a lot of interest we track a lot of this kind of activity through our research council, which is around about 400 insurer CIOs across the industry that we ask about emerging technology every year as well as a bunch of other things. And if you look back 10 years ago, there was really very little going on other than POCs in I O T if you look back five years ago, probably based on who we polled and the types of company that were asked the question there was about roughly 10% or so penetration in terms of IOT wearables, which I guess we'll talk about as well today was lower.
Martin Higgins: (
But T sensors, that kind of thing, penetration was about 10% when you look at it, our most recent results were as of 2021 end of last year. And we're getting reports from CIOs that it's just close to to 20% of insurers have some kind of I O T sensor type wearable program going on. There are still a number of companies that are doing POCs. That number of companies that are doing POCs has gone down as the folks that have actually put this into production operationalized that has gone up. So there is kind of a ceiling in terms of companies that are interested in this kind of technology at around about 30, 40%. And we're kind of over time, the level of maturity is improving and we're getting more folks moving from proof of concept stage into actually operationalizing something. Some of the things that we've heard anecdotally about the challenges are really about the complexity of the rollouts, the technology, finding the right partners that can engage with insurers on this kind of thing. But we'll talk about those things as we go through the discussion.
Valerie Turpin: (
Thank you, Martin. So speaking about the difficulties of integrating all the challenges, Lisa, on new side, representing the carriers here, what the challenges you have seen and what success stories you have seen to.
Lisa Pires: (
Sure. So, obviously it's a large amount of data that needs to be considered in all of this. And I think artificial intelligence certainly plays a part, but I think it only plays so much of a part because there's so much new data coming in. I think also when I think about infrastructure and I don't just mean technology, I think you need to think about the talent. You need to have to do the kind of work here. If you're getting these insights, if you're getting this data, how are you getting to the insights? So data engineers, data architects, data scientists, those are expensive. Those are not easy to find that talent right now, out there in the market. That's a challenge. Information security is a challenge. If you want to think about bringing the data in house which is not something that we're doing, we're leveraging partners. So there's a lot of different challenges that need to be thought about. And as a result of that, there's limited investment and you really have to be intentional with where you're going to invest and look at those and make those decisions and really start small and start building from there. But I think it's all of that, right? It's people process and technology that makes it a challenge.
Valerie Turpin: (
Is that easy to find the right partnership today?
Lisa Pires: (
Yeah, I mean, that's a hard question. So first I'll say on the topic of finding the right partnerships, when you think about the roles inside of a carrier that need to be responsible for this. I think first we talk about this all the time. You need to know the business and you need to know a bit about technology in order to get out there and really think about the partners, the O T partners you're going to work with. What kind of hardware software do they have? Is it up to date? Are they changing their business models? There's just questions that have to be asked. So I think at first starts with the internal talent and their ability to engage in these conversations and seek out the right partners when you find partners. I think it's about variety because there's a lot of different things that you can do. And then there's all the contractual pieces too, that have to be considered with it. So it's a challenge for sure, but I think what we think about is the breadth of experience that someone needs in order to engage and have these conversations.
Valerie Turpin: (
So speaking about the brace of experience, when we were preparing today, we had the conversation about it. So, you understand the innovation at your insurance company, I'm on the business side, so I have needs and I usually express them and say, I just want to have to press a button. And honestly, that's not what you want to hear from the business unit. So Martin, you made some comments about that. How can we reconcile the language between all the partners?
Martin Higgins: (
Sure. It, yeah, I mean, it's a real challenge. I think it goes way beyond, this particular topic in IOT and it's business it alignment is one of the biggest struggles that organizations have today is making sure that it and the business are kind of can get alignment. Can make sure they're talking about the same things, that strategy, it delivery aligns with what the business is trying to accomplish. There are when we look back to, maybe 10 years ago when OT was relatively new businesses would often engage with inure tech partners that had developed technology and processes, sensors, wearables, that kind of thing that was always considered at that time of stepping stone. It was like we're gonna partner with these guys.
Martin Higgins: (
We will learn eventually deploy our own capabilities in these areas. It seems like based on the conversations we have with insurers that many, that those insurers that are still using, that started using those partners, technology partners are still using those partners today. And I think a lot of it comes back to what Lisa was saying with regards to building those capabilities, to be able to deal with the data directly, the raw data from those devices. Everybody recognizes that the richness that these devices can go way beyond underwriting and loss control. Right, the real value is in that is mining the data and using it to develop new products. But it feels like for resourcing reasons, for technology reasons this kind of volume of data, this kind of velocity of data requires investment in cloud technology, which many insurers are kind of lagging a little bit on data science is a big issue.
Martin Higgins: (
So many insurers that we talk to are still stuck in the we're working with these partners from a sensor perspective, or working with these partners from a telemetry perspective, very few have followed through successfully on bringing it in house and really getting the raw data and mining that data and really developing that insight the way that they'd hope to. So I think if there's a missed opportunity or maybe a delayed opportunity, I think if you talk to CIOs, they'll tell you and business folks they'll tell you that is what, that's where maybe the promise was not delivered or hasn't been delivered in the last time.
Valerie Turpin: (
Did you all know that as a success story in,
Martin Higgins: (
I mean, there are companies out there that are delivering successful programs based on IOT and sensors. One of the obvious ones is that have been doing it for a while, church mutual with Harford steam boiler. They've had success in the program. There are a number of successful programs on the wearable side that have at least claimed to deliver significant reductions in workers comp claims, back much more rapid back time to work in the 60, 60% range. So it's a significant saving but most of it has been on the low hanging fruit which we would consider to be the lost control side of things, right. There's been not as much movement on underwriting side of things. There's been less movement on really mining that data from an actuarial perspective, understanding the risk better. We all know in the industry that our models are not what they used to be. When it comes to predicting risk and IOT data has the promise of IOT data is it's giving us new ways of developing models. And that really hasn't seems like hasn't come to fruition yet.
Valerie Turpin: (
We were also talking that the art of underwriting continued to be very traditional. I think that we do have a legacy there to change the underwriting perception and how the underwriting decision should be to integrate the data, to integrate the information and to make better judgment that's on making some progresses, but we are still carry on quite a lot of legacy on that. I was just curious,
Audience Member 1: (
Yeah. Talk about the adoption rate five to 10%. Does that include automotive telematics?
Martin Higgins: (
No, we break actually we break telematics out as a separate, so IOT has historically lagged telematics, but they're actually pretty close to being on parity now. Surprisingly telematics seems to be stuck at a roundabout, 20, 25% in terms of deployment. OT is approaching the IOTs and sensors and wearables. It's kind of approaching that.
Valerie Turpin: (
Any other questions or comments
Martin Higgins: (
Who here is working for an organization that's actually deployed some IOT or wearable technology in any aspect of the business one. Okay. So maybe our numbers are off.
Martin Higgins: (
It's all about the sample, right. Sample size.
Valerie Turpin: (
So, we discuss on some of the changes, more on the integration, but Martin, can you speak about the cyber exposures that come with the increased connectivity and sensors?
Martin Higgins: (
Yeah, it's an interesting one. Cyber is high on every CIO's agenda, there's a lot of risk out there and it grows year over year. And what the biggest component of the it budget that we see growing year over year is not digital. Surprisingly we're in a digital conference but it's security. It security is the component that grows year over year. Many of these startups that have developed the sensor technology, they are startups and they've had limited, so it from an it perspective, you're an established, insurer with a brand reputation. One of the considerations is the risk associated with you're extending your perimeter when you, E even if that data isn't feeding directly into your systems, if you're working with an inure tech who's taking that data and scoring it appropriate, it's still associated with your brand. So there is a brand reputational risk associated with this, something to bear in mind when you work with any insure tech, but particularly one that's dealing with that has a footprint in one of your customers. Because that can introduce some exposure. We haven't seen any, at least that I'm aware of any significant, exposures yet because of it. But, it's certainly a risk to think about.
Martin Higgins: (
Many of these devices are not secured the way your network is secured. So, buyer beware in that regard,
Valerie Turpin: (
Do you want to add to cyber.
Lisa Pires: (
Myself? I mean, I completely concur with that is definitely where we're seeing the increase in spend. There's a lot of concern. There's been a lot that's happened in our industry that is concerning. So when you think about this, there is risk, which goes to, I think the only thing I I'll add is when looking for the right partners, understanding this risk and making sure that that is part of the conversation is really important.
Martin Higgins: (
So I think it comes back to what Lisa was saying earlier on, about having the right team with the right skill sets, assessing these vendors. It needs business, it needs security. All of these things need to kind of come together. We have seen situations where partnerships have been formed without because the technology is cool and because they look to be a real business benefit from adopting a technology, it organization wasn't brought in until much later in the process and that that can present some challenges. So bringing teams together that can assess these technologies from a bunch of different dimensions, will pay off in the long run, right? You don't wanna go too far into a particular partnership without checking and some of the boxes that need to be checked.
Lisa Pires: (
It's interesting, as I think if I have to think about it, I think the it's typically when I think business, it's a lot of the business partners that are making the decisions on these IOT devices. So it's absolutely true that at times it is not at the table in these conversations especially if the data's not coming in, so you really don't need to have the conversation. So you're just going off and making the decision. And I think it's proceed with caution, be thoughtful, make sure you've got some level of understanding cuz if your it partners at our are not at the table, you could be putting yourself at risk.
Valerie Turpin: (
Yeah, totally. I mean that at arch we can't make a decision before we sign off from the it department on safety and security. So the business will not be the decision maker without proper signoff before organize it's very prudent and the right way to go through, I also wanted to ask you the views that you have about the upcoming regulation and what could be the consequences for carriers.
Martin Higgins: (
Yeah, I mean, it's interesting. Most of the regulation focuses more on kind of is related to cyber security and related to data privacy and those kinds of things. There is less, it's less applicable on the commercial line side than it is on the personal line side. Obviously, the treatment of data, personal data, personally, identifiable data on the personal line side especially that associated with telemetry in vehicles is a major risk and is subject to privacy regulations and so on, which are obviously we have in Europe, GDPR and CCPA in California there seems to be some traction or there has been for, I've been saying this for three years but our government is a little bit dysfunctional as many people will agree with there is a and this has been multiple governments, right?
Martin Higgins: (
This isn't any, there's been working groups in all, in both houses working on federalizing some of these regulations and they haven't really come to because, because the cost of business associated with having statewide regulations and trying to under which conflict is significant. They haven't made a huge amount of progress. It's likely that there will be some at some point just because of the cost of business and not doing it. The impact is really primarily on the personal line side. But when you start to think from a commercial line side of wearables especially on the workers comp side, then you are dealing with potentially sensitive information. You are also storing that information potentially in somebody else's environment. So you've gotta think about, are we as an insurer given that, this is a subcontractor of ours acting as a custodian of that data, are we dealing with it in the right kind of way? So same as when you deal with an MGA or you deal with a retail agency, many of these organizations are quite small, so you're gonna be assuming some of the risk because of your size versus their size.
Valerie Turpin: (
Yeah, totally. These are I also wanted to ask you, the numbers are evolving and developing in which area of the insurance commercial insurance, do you see the development becoming the more prevalent and the more important and to become the norm in few years? Yep.
Lisa Pires: (
Yep. We think about it. We think about it in three areas, it's property protection, it's worker safety. So all of the worker comp and then we think about telematics as well. And I think in the context of the commercial business, it's managing the fleet and it's not just about driving patterns. It could be about helping drivers get better driving roots. It could be a lot of things inside of that space, but those are I think the three areas that we see and that we're focused on. Certainly, I mean the topic here is what's the ceiling. I think anything's possible. There's so much going on out there. So I wonder what we're gonna be talking about in 10 years, although I really hope I'm not here in 10 years and I'm enjoying life a little bit more. So, it's gonna change and I think it may be more than that, but for now, those are the areas that we're focused on.
Valerie Turpin: (
So that's really a focus on risk mitigation and risk assessment. And obviously that will have an impact on pricing of the products. So to go back to the first question we had, that will probably offset some of the challenges that we have seen the cost, the identification of the right partnerships. Yep.
Lisa Pires: (
That's exactly right. I think the economics on this are hard. Right. How think about the change in adoption. It's not that significant, how do you make a business case to move forward when you need the talent? You need the infrastructure etc. So I think the economics is a challenge. I think adoption is a challenge and certainly the data and leveraging that data real time is a challenge. And so there's a lot to overcome to make this work. But at the end of the day, I think someone will figure some of these pieces out.
Valerie Turpin: (
Yeah.
Martin Higgins: (
Yeah. I think it's a case of prioritization. The promise has been there. It's been there for 10 years. I think what's, I think what happened is many insurers underestimated the complexity of dealing with dealing with these programs and extending them beyond kind of the lost control, the obvious, the low hanging fruit use cases for this kind of technology. And it's also been a case of prioritization, right? If I've got a fixed pool, like many insurers do very fixed pools of data scientists, right. They're hard to find their expensive, as Lisa said, I've gotta prioritize where I'm applying their expertise and there are more low hanging fruit at the moment, than OT programs.
Martin Higgins: (
That's just the nature of over the next 10 years, my expectation would be that this will, this is the future is moving more from pool based risk assessment towards individualized risk assessment demutualization if you like and this is gonna play a significant part in that the carriers that can do this well, that can price risk much more, it's all about drawing finer distinctions, right? About which risks you take and how you price them, the carriers that do that well are the ones that are gonna win moving forward. That's it, it's happened a lot slower than we've anticipated, but I don't doubt that it will happen. Assuming that we don't get sidetracked with some other business priorities in the next 10 years.
Valerie Turpin: (
Very good. Well, thank you very much question.
Audience Member 2: (
Yeah, we've spoken. I feel like a lot about the internals of it, you getting business and it align at the end of the day, an IOT play means uninsured has to put these devices in their own house. We talked about security being a headman, but the truth is I don't want as an insured. I'm probably not as safe as I made you believe I am. Right. I'm probably much more riskier. So by me putting this in here, I'm actually telling you just how risking I really am. So what have you seen businesses actually pulling off in the times when they've been able to get these programs up to incentivize someone to actually do it? And have you found, have you seen like people yeah, it's good enough that they're willing to sort of open the kimono and let the carrier know just how risky they really are.
Valerie Turpin: (
We discussed a little bit that actually at lunch before this, what I've seen is for some very specific groups of insure mostly those that have issues to find carriers because they are in the extreme side of the type of race, very specific ones. We do see more and more sales broker creating facilities and groups for those, because that the only way to provide enough and enough, a big enough portfolio to find a carrier, willing to put some capacity on this. And when they come to us, that is part of the eligibility to be part of the facility that's a requirement that those insured will have no other choice to get proper insurance at no affordable, price point, not decent, but affordable. I guess they will have no choice, but we speak about very specific targeted segments. I totally agree with you that if we want to be more generalist and if we want to touch a larger population of insured, that we will have to go through the barrier of, I don't want to disclose exactly what minor risk is, which is probably a certain type of mindset and behaviors that the industry has to go beyond if we want to have the ability to differentiate better insured and then make price more accurate for each people.
Martin Higgins: (
I think this is actually the topic of the next panel, which is about personal lines, which is a little bit ahead of commercial lines in this regard, because people do have, there are more privacy concerns on the personal line side. And many people feel that I, who thinks they're a safe driver, I'm not gonna, I won't ask that's a hypothetical question. I won't ask for hands. But how is my data gonna be interpreted? Am I gonna be punished for my less, have an issue on the commercial line side? I think we'll reach a tipping point at some point where these technologies are so broadly adopted that if, if you're not gonna be as a customer, you're gonna be penalized for not taking the technology. And as a carrier, if you're not using the technology, you're gonna be subject to adverse selection, you're gonna be taking those risks. You're finding those risks, self-selecting into a different program. So, I don't think we're at that threshold yet, but maybe when penetrations at 30% of the market it's gonna become a factor for sure.
Audience Member 2: (
Yes. For the bread of real estate for multi-family, for example, they're getting crushed on annual premium increases starting 40%.
Valerie Turpin: (
Oh, more than that.
Audience Member 2: (
Yeah. Yeah. I mean, it can be more than that, right. Oh it, and they're seeing the deductible go like through the roof, which creates a lot of exposure for them. Do you, that's essentially that you can use the carrot of stick method to motivate people to mitigate risk. And is there any incentives that you see coming to the commercial side for the adoption, right. Like not necessarily the insurance carrier providing the tech, but sort of saying, if you have this, you could get X, Y, and Z, but you have to have sort of a proof model in place to say, you've decreased your loss runs. And so there's exactly you see any carriers providing that, getting models together
Martin Higgins: (
That you'd say a little more of these kind of reward based programs on the personal line side than you do on the commercial line side today. And I think that's the place to watch, obviously not all of the incentives and some of it is just about it's financial incentives, right. Some of it is about, can you add additional services layer on services on top? Even though you're providing indemnification, there is still significant business risk to any kind of disruption through injured workers or through flood damage. Right. You can't indemnify a business completely. Correct. So it's just a case of looking at the financials but also looking at other ways that you can layer in, if you've got sensors that are don't even necessarily have to be if there's a concern about privacy, those sensors don't have to be there are vendors out there that the sensors don't feed anything to the internet. Right. All they do is they'll trigger a it'll detect a leak, it'll stop a valve. So offering discounts to use services like that, bypasses some of the privacy concerns, how is it affecting that premium concerns, but allows you as an insurer to grant some kind of discount. So, I take just watch what's going on the personal line side with regards to, they've got bigger samples to work with they can.
Audience Member 2: (
So, not so much like discounts, but like maybe specialized programs that are set aside
Martin Higgins: (
For like, exactly you wanna
Audience Member 2: (
Participate in this
Martin Higgins: (
And share exactly, have,
Audience Member 2: (
You know, you can access this pricing versus
Martin Higgins: (
Pricing.
Valerie Turpin: (
I can also see that unlocking capacity. I think that especially in the area, I mean, being in property, what I do see it's a lack of capacity carriers don't want really, to deploy a lot of limits on those. So that could unlock capacity. We've done a lot of analytics at arch about arbitrational book. We know which drivers are more likely, I mean, to create a frequency and a severity type of losses and claims. So, there are potential remediation of those items, And devices can help other measurement can help. The question will be this risk is still syndicated, so you will probably need, I mean, to build several sufficient capacity, several carriers on the single risk. So the carriers have also to agree that this solution is applicable to all the risk. So that's probably the next level of complexity to achieve that. But I do believe that can be possible.
Audience Member 2: (
We don't know of anyone that's doing it now.
Valerie Turpin: (
Not to my knowledge, no. Any other questions we are going to conclude? Thank you very much for your participation. Thank you very much for all the questions really appreciate it. And, if you want to continue the conversation I'll be around, you will see us, you very much.