It's Time to Get Back to Basics  February 28th 2023

It's Time to Get Back to Basics

My friend Adrian last month shared a McKinsey deck from 1993. (You can find it here.) One of the last paragraphs of the 38-page paper says: "These principles are obvious. Why do so few companies follow them? Because the senior management commitment required is substantial while the payoff is down the road." That line has aged really well!

It is a pity for an insurer not to use data and technology to do their job better nowadays. All the insurers (that survive) will be #insurtech: meaning players using technology as the key enabler for achieving their strategic goals. So, let's take a look at the current state of insurtech to see why you should focus your innovation efforts on the basics of the insurance business.

Since the beginning of the year, we have seen a new report almost once a week about the 2022 funding to insurtech startups:

• FT Partners
• Gallagher Re
• CB Insights

In a nutshell, be more like HDVI and less like Root.

Matteo Carbone, founder and director of the Connected Insurance Observatory

Building connected insurance starts with customer-focused innovation

Connected insurance is primed for massive growth during the next decade, with telematics adoption leading the way. The global automotive embedded telematics market is anticipated to reach $87.3 billion by 2030. As insurers race to integrate telematics and IoT into their connected insurance offerings, it can be easy to lose focus on what really matters to customers.

INNOVATION AS A COMPANY VALUE

USAA was founded 100 years ago and is by definition an innovative company. “USAA started when 25 military officers came together because they weren’t supported in the proper ways by traditional insurance companies,” says Luke Harris, VP of Innovation at USAA. “As one of the very first military focused startups, that innovation has carried forward throughout our history, with nearly 1,000 patents developed by employees. Innovation is embedded in USAA.”

USAA’s recommendations for connecting with customers on connected insurance include:

Embrace the company’s inherent culture of innovation

Create solutions to solve business problems and member needs

Learn from all sides of the business

Engage insureds via education and preparation to minimize risk from catastrophic events

Auto Insurance Customers With Poor Credit Pay up to 60% More

AutoInsurance.org recently released its list of the 12 most significant factors that affect auto insurance. While most people aren't surprised to read that a driver's history of accidents and traffic violations made the list, many did expect to see that credit score matters as much as it does.

According to the report, a low credit score could result in up to 60% higher car insurance rates. With that much at stake, insurance policyholders should look for ways to improve their credit.

According to AutoInsurance.org, a low credit score could result in up to 60% higher car insurance rates.

Melanie Musson, a nationally recognized car insurance expert with AutoInsurance.org, shares, "It's unlikely an insurer will run a policyholder's credit once their policy is established. Since credit score significantly impacts rates, the policyholder should request an updated credit report check."

Electric vehicles the next breakthrough for usage based insurance?

In 2022, more than 10.5 million battery electric vehicles were sold worldwide.

Driven by momentum on commercial-vehicle decarbonization as well as government policies, we estimate that global electric vehicle sales will reach 34 million in 2030, with around a 36% penetration rate of vehicles sold.

Although electric vehicles have great market potential, the higher auto insurance for electric vehicles pushes up the total cost of ownership, which has increased customers’ concerns about electric vehicles to a certain extent. According to Forbes, insuring an EV costs about $100 more per year than its internal combustion engine equivalent for the most popular models. Luxury electric vehicle owners, such as Tesla owners, are even being turned down by insurers due to high collision coverage costs, which is partially why Tesla invented developing insurance on their own.

PTOLEMUS Consulting Group report

The Growing Cost of Wildfires: Getting Ready for Forest Fire SeasonThe Growing Cost of Wildfires: Getting Ready for Forest Fire Season

Wildfire seasons are getting longer and more destructivec and are a growing concern for everyone. Insurance companies are no exception. Since wildfire records began in 1983, there has been a 223% increase in wildfires, according to the National Interagency Fire Center. In 2022 alone, there were 68,988 wildfires in the U.S. compared to 58,985 in 2021, a 16.96% increase. Wildfire seasons are getting longer and more destructive, according to CoreLogic, with the annual destruction of wildfires during the last 10 years at an average of 6.8 million acres, compared to 2.7 million acres between 1983 and 1992. These fires are a growing concern for everyone, and insurance companies are no exception.

2020 was one of the costliest in history, with wildfires causing $16.5 billion in damages. This not only impacts government bodies and utility companies who are responsible for repairing damages to infrastructure, but it also impacts homeowners in high-risk areas. This continues to have an effect on insurance everywhere.

Digital twins can empower insurers to overcome the climate crisis

As natural disasters continue to sweep the globe, climate change brings increasingly unpredictable and damaging weather patterns that insurers must battle to ensure profitable yet competitive underwriting.

Throughout 2022 in the United States alone, there have been 15 weather-related climate disasters with losses exceeding $1 billion each. This is the eighth consecutive year in which the U.S. has endured ten or more billion-dollar disaster events, which have included drought, flooding, severe storms, tropical cyclone events, and wildfires. The National Oceanic and Atmospheric Administration estimates that damage costs from weather and climate disasters in 2022 could exceed $100 billion.

How can insurers stay one step ahead in this chaotic, destructive and temperamental risk landscape? They must use advanced technologies to undertake a risk management approach that encompasses inevitable yet turbulent hyper-scale events.

Chubb introduces Chubb Climate+

Chubb announced the name for the new global climate business unit the company launched last month: Chubb Climate+. In addition, Chubb announced the appointment of three executives who have joined the business unit’s leadership team.

Chubb Climate+ will provide a full spectrum of insurance products and services to businesses engaged in developing or employing new technologies and processes that support the transition to a low-carbon economy. The business unit also provides risk management and resiliency services to help those managing the impact of climate change.