New Study: Insurance Products for the Next Generation
24 Sep 2008
ZURICH: Finance News | Wednesday, 24 September 2008 10:32
Increased competition and the growing need for individualized and customized insurance products require groundbreaking innovations. Against this background, Accenture along with the “I-Lab,” a joint research initiative of the Swiss Federal Institute of Technology (ETH) Zurich, the University of St. Gallen (HSG), and the insurance industry, has released a study on the importance of new technologies in the insurance sector.
The focus of the study is ubiquitous technologies. "These are systems that enable everyday objects with needed digital logic. The data obtained can be used for an accurate view of individual objects used and so improve the visual acuity of insured persons and objects," says Guido Scherer, partner with Accenture Financial Services AG. The improved visual acuity is measurable and assists insurers to provide comprehensive and individual services.
The insurance services of tomorrow
The study results determined three developments in the insurance services of tomorrow which will dominate: (1) Further tariffs from behavioral data, (2) more active risk management and (3) increasing integration of the insurance coverage with the protected object. "These all contribute to indicate that insurance products in the coming years will change," said Elgar Fleisch, professor of information technology management at ETH Zurich and St. Gallen University. Parts of these developments are already taking shape.
Pay-as-you-drive (PAYD)
Under a PAYD approach insurers now offer single vehicle policies, which have the advantages of ubiquitous technologies. By installing an on-board unit in the vehicle, the GPS location data is collected and processed making the reporting of exact mileage, more rapid response to an accident, and more attractive premium services possible. The British insurer Norwich Union has experience in this area, although not all of their products launched using a PAYD approach were successful.
Proper positioning is critical
Correct positioning will ultimately determine the success or failure of a technology-insurance product: such as providing an environmental bonus rather than a risk surcharge, encouraging prevention instead of punishing behavior, and providing care instead of monitoring. Only with the right arguments can customer enthusiasm for new technologies be achieved. The social acceptability of the use of ubiquitous systems will depend on how data is used in the future to calculate premiums.
Actively addressing privacy concerns
When questioned about possible challenges to the use of new technologies, the study participants refer mainly to narrow legal framework and possible concerns about burgeoning data protection. They agreed that discussions on privacy will follow, especially if the benefit to customers is unclear. The successful deployment of this new technology is not halted, especially if there is transparency in the use of data and the dialogue with the public actively managed. Data can be discussed with the majority of study participants and concerns avoided by an improved customer service and attractive range of additional services offered.
Societal changes have reservations about the ubiquitous technologies already dwindling. The understanding of privacy has been changed because of online platforms such as Facebook or YouTube, which promote a more open handling of personal data. Another positive trend in the use of ubiquitous technologies, is the increased ability of younger generations to understand and deal with new technologies.
Use of technology reduces costs
The additional data that the new technologies deliver also offer alternative methods to reconstruct damage. Similar to “black boxes” in airplanes, ubiquitous systems in vehicles or cell phones can provide information about incidents of damage and prevent fraud attempts. An essential prerequisite to such technological advantages is a necessary openness with external partners about capabilities in the area of technology use, or the distribution of data mining to benefit them. Damage assessment and performance analysis is greatly speeded up by the use of new technologies, therefore providing a clear quality improvement, since claims are cheaper to handle thanks to the reduction of unnecessary data interfaces.
About the study
The study, "Increased visual acuity - Technology innovations in the insurance industry" examines the opportunities and challenges posed by the use of ubiquitous technologies for the insurance markets in Germany, Austria and Switzerland. In addition, 45 executives at top management and Board level from Germany, Austria and Switzerland, were interviewed. The majority of respondents are composed of representatives from the insurance industry (77 percent) and 23 percent of respondents come from related companies (technology providers, service providers, customers, associations and brokers).
(accenture/mc/ps)
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