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The Revolution Will Not be Televised

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  • The Revolution Will Not be Televised

    Differentiate or Die!

    Insurers face unprecedented competitive pressure owing to technological change. The march of automation and technology represents a big opportunity for new entrants who are changing the game with better risk analysis and predictive data.

    What is your company doing to "differentiate" from your competitors?
    The American P&C industry, has seen its “combined ratio,” which expresses claims and costs as a percentage of premium revenue, steadily creep up from 96.2 percent in 2013 to 97.8 percent in 2015, and to an estimated 100.3 percent for 2016—i.e., a net underwriting loss. Henrik Naujoks of Bain & Company, a consultancy, said that this has left such insurers facing a stark choice: become low-cost providers or differentiate themselves through the services they provide.
    One fairly simple way to offer distinctive services is to use existing data in new ways. Insurers have long drawn up worst-case scenarios to estimate the losses they would incur from, say, a natural catastrophe. AXA, a French insurer, recently has started using its models on the flooding of the Seine to prepare contingency plans. Gaëlle Olivier of AXA’s P&C unit said that the plans proved helpful in responding to floods in June 2016, reducing the damage.
    Data from sensors also open the door to offering new kinds of risk-prevention services. As part of Aviva’s partnership with Home Serve, a British home-services company, the insurer pays to have a sensor, a so-called “Leakbot,” installed on its customers’ incoming water pipes, one sensitive enough to detect even minuscule leaks. Home Serve then can repair these before a pipe floods a home, causing serious damage.
    The shift toward providing more services fosters competition on factors beyond price. Porto Seguros, a Brazilian insurer, offers services ranging from roadside assistance to scheduling doctor’s appointments. In France AXA provides coverage for users of Blablacar, a long-distance ride-sharing app.
    Insurers face many hurdles, however, to becoming service providers and risk consultants. Maurice Tulloch, head of the general-insurance arm of Aviva, admitted that such services have yet to catch on with most customers.
    One example of what the future may hold comes from the car industry. Mercedes and Volvo are so confident of their self-driving cars that last year they said that they will not buy insurance at all. They will “self-insure”—i.e., directly bear any losses from crashes.


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