Matteo Carbone has shared his bold view about insurtech for some time, and he’s doubling down on his beliefs.

It’s no secret that I’m an insurtech enthusiast. I’ve shared my view about the need for any insurance player (insurer, reinsurer, distributors, and so on) to become an insurtech player during the next several years. This will mean organisations where technology will prevail as the key enabler for the achievement of strategic goals.

It was only 12 months ago that I published my ‘four Ps’ to assess the potential of each insurtech initiative. My approach is based on four axes related to the fundamentals of the insurance business:

  1. Productivity. Impact on client acquisition, cross-selling or additional fee collection for services.
  2. Proximity. What an insurtech approach can do to increase the relationship frequency, by creating numerous touchpoints during the customer journey – a proven way to increase a customer’s satisfaction.
  3. Profitability. What can be done to improve the loss ratio, or cut costs without an increase in volumes.
  4. Persistence. Increasing the renewal rate, thus stabilising the insurance portfolio.

The insurtech ecosystem has shown terrific growth in the last 20 months, after many VCs complained about the absence of insurtech startups. The updated Venture Scanner’s map shows more than a thousand initiatives, with more than $17.5bn invested. The need for a pragmatic approach, the ability to prioritise the initiatives, and a stronger focus on innovation have become more relevant.

I strongly believe in the effectiveness of the aforementioned four axes to evaluate a business. In the last few months, I followed this view to make investment and career choices.

At the beginning of the year, I invested in Neosurance, an insurtech startup currently accelerated by Plug & Play in Silicon Valley, and I’m supporting the company as a strategic adviser. This company developed a platform to enable incumbents to sell the right product with the right message at the right time to the right person. By using artificial intelligence, Neosurance aims to become a virtual insurance agent with the ability to learn and improve how it sells. I fell in love with its model because of its productivity angle, the first of the four Ps.

Let’s consider all the noncompulsory insurance coverages. The large part of the purchases have been (and still are) centred on a salesman’s ability to stimulate awareness and show a solution. In a world that’s becoming increasingly more digital and is becoming less about human interaction, I’m skeptical about the ability to cover people’s risks with the current approaches of online distribution, comparison websites and on-demand apps. All three of these approaches require a rational act and a lot of attention, yet many customers look more like Homer Simpson than Mr Spock.

Those are the reasons I’m optimistic about Neosurance’s business model. On one hand, its B2B2C model aims to be present where and when it matters most for the customer. And its “push” approach is able to preserve underwriting discipline, which is the only way to continue in the middle-term and distribute a product that keeps a promise to customers. My investment choice was based on the business model evaluation, the company’s pipeline and the quality of its team. I hope to be able to make more investments.

New insurance paradigm

I also decided it was time for a job change at the end of 2016. After 11 years, I left my career with Bain & Company, where I advised the main insurers and reinsurers on the European market. I had focused my activity on the single insurtech trend I’m passionate about: connected insurance. In the last several years, I’ve advised more than 50 players on this topic, from insurers to reinsurers and from service providers to investors.

I consider the use of sensors for collecting data on the state of an insurable risk, and the use of telematics for remote management of the data collected, to be a new insurance paradigm. For years, many of the use cases we’ve seen globally have only somewhat used the potential of this technology to support an insurer and achieve his or her strategic goals.

My belief could be well understood by observing the best practices of auto insurance telematics and their performance regarding the other three Ps:

  • Let’s start with the proximity angle. Insurers have provided telematics-based services that have reinvented a driver’s journey. More and more players are focusing on this opportunity to create an ecosystem of partners to deliver their suite of services. Discovery Insure is one of the best at doing this because it’s able to reward clients with a free coffee or smoothie for each 100 kilometres they drive without speeding or braking hard. Is there a way for you to be closer to your client?
  • The Italian market shows the potential benefits in terms of persistency. There are more than 6.5 million cars with a device connected to an insurance provider in Italy, and the telematics penetration reached 19% in the last three months of 2016. On average, the churn rate on the insurance telematics portfolio is just 11%, which is lower than the 14% churn rate on the non-telematics portfolio.
  • Last (but definitely not least) is the profitability side. The Italian telematics portfolio shows a claims frequency that, risk-adjusted, was 20% lower in comparison with the non-telematics portfolio, as I mentioned in a paper last year. The best practices were able to achieve an additional 7% average claims cost reduction by acting as soon as a claim happened, and by reconstructing the claims dynamic. These savings let insurers provide an upfront discount to the clients. This makes the product attractive and achieves higher profitability.

My day job now is to run an international think tank focused on connected insurance. More than 25 companies have joined the European chapter since the beginning of the year, and eight players have joined the North American chapter since March. This initiative is developing the most specialised knowledge on insurance IoT, which is based on multi-client research. I personally deliver the contents through one-to-one workshops dedicated to each member. Throughout the rest of the year, I will host plenary meetings with all the players to discuss this innovation opportunity.

I felt honoured and privileged last spring when former Iowa insurance commissioner Nick Gerhart invited me to present my ‘4 Ps’ at the Global Insurance Symposium 2017 in Des Moines, but I didn’t realise how this framework would so deeply influence my life decisions. It’s definitely an interesting time to be in the insurance sector.

READ NEXT: Dan Preston from Metromile on insurtech and the cars of the future

– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Photo by Georgii Shipin, Shutterstock.com

About the author

Matteo Carbone

Matteo Carbone is an insurtech enthusiast, an insurance thought leader, a principal in Bain's Financial Service and Digital Practice, and founder of the Observatory on Telematics, Connected Insurance and Innovation.

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