Presentation given by Matteo Carbone at the 2017 Global Insurance Symposium.

1. April 26th 2017
4 Ps of Insurtech
Matteo Carbone
Founder and Director, Connected Insurance Observatory
@mcins_

2. 2
About me
Matteo Carbone
Founder and Director of the Connected
Insurance Observatory
+11 years strategic consulting
(former Principal with Bain & co.)
Keynote speaker and writer on
insurance innovation
Global InsurTech Influencer
(1° InsurTech Influencer by InsurtechNews,
Top 5 InsTech Influencer by InstechLondon,
Top 3 InsurTech Influencer by Right Relevance;
Top 5 IoT Influencer by Postscapes,
Top 25 Disruptors in the Insurance Industry by Vertafore)
• The Insurance think tank started in Europe on
2016 aggregating almost 30 international
insurance groups, institutions and tech firm
• The initiative delivers three concrete outcomes:
‒ the most pragmatic multiclient research
specialized on the insurance IoT domain
‒ one-to-one workshops dedicated to each
member to discuss the research outcomes
‒ plenary symposiums with all the members
together around the same table

3. 3
The current participants to the European Connected Insurance
Observatory 2017 edition
AIBA
Zurich
Allianz Worldwide Partners
Swiss Re
Munich Re
RGA
SCOR
Reale Group
Chubb
Cardif
AVIPOP (AVIVA)
IMA Assistance
Cattolica Assicurazioni
Guidewire
Octo Telematics
Vodafone
Aubay Sysdata
InsurtechNews
Do Different
Portolano
Insurers
Re-Insurers
Techs
Others
HelvetiaChiara Assicurazioni
Sara Assicurazioni
UnipolSai
Groupama
AXA
Cloudera

4. 4
Why did we come here?
Insurance is about to protecting the
way people lives
Insurance have been since 1347 a contract
where someone promises to indemnify
another against loss or damage from am
uncertain event as long as premium is paid
to obtain this coverage
It’s unthinkable for an insurance
company today not to pose the
question of how to evolve its own
model by thinking which modules
within their value chain should be
transformed or reinvented via
technology and data usage
I believe all the players in the
insurance arena will be
InsurTech, meaning organizations
where technology will prevail as the
key enabler for the achievement of
strategic goals
Insurtech can make the insurance sector stronger and in that way more able to
achieve its strategic goal: to protect the way people lives!

5. 5InsurTech map (1200 startups, 17,5 B$ funding)
Software is eating the insurance business
P2P
Internet of things

6. The innovation process is not simple and linear

7. 7
Strategy first!
•Strategic focus, prioritization
•Appropriate allocation of resources
•Change mindset, culture of learning,
risk-taking and innovation
•Organizational relevance,
proximity to CEO
•Execution, mobilize for success
•Strategic focus, prioritization
My way to evaluate an
insurtech initiative
Insurance
perspective

8. 8
Let’s starting with an example of insurtech initiative focused on
productivity
Insurance
perspective

9. 9
I’ll show you one approach based on Artificial Intelligence
Machines with a «human intelligence»
enabling the systems to
perceive, decide, act, learn and adapt
in order to maximize their chance of success
at some goals
Natural language processing
Robotics
Machine learning
Speech recognition
ComputervisionINPUT OUTPUT
ARTIFICIAL INTELLIGENCE
(algorithms)
Expert system
Insurance
perspective

10. 10
The insurance customer is interested to receive personalized
insurance offers
0
10
20
30
40%
Share of customer interested to
personalized insurance offer based on the
telematics device's data
Spain France UK US Austria Italy Germany
Source: Connected Insurance Observatory, SSI
Insurance
perspective

11. 11
Would you like to
protect your luggage?
Be present where and when it matters most is relevant Insurance
perspective

12. 12
The Neosurance is a Virtual Insurance Agent
DISCLAIMER
I’M AN INVESTOR
OF NEOSURANCE
Neosurance’s AI understand context,
preferences and personality type of the
customer so every insurance proposal
is personally tailored real time
“segment one” marketing approach!
…to the
right person
Insurance
perspective

13. 13
Insurance purchase is not exciting, insurance is sold not bought
When not compulsory, you have to stimulate the need!
Insurance
perspective

14. 14
Software is eating the world…
The insurance sector will also face the challenge of less human interactions
Average daily activity with the smartphone:
• 1,3 – 3,8 hours
• 75 - 135 sessions
• 2,617 - 5,427 clicks
More than 50% of us use the smartphone
while talking with friends or having dinner at
restaurant
Almost 50% of us sleep near our phone
Source: Time, dscout
Insurance
perspective

15. 15
…and the attention is falling
The average attention
span of a goldfish is
9 seconds
The average human
attention span on 2000 was
12 seconds
The average human
attention span on 2013 was
8 seconds
Source: Statistic Brain
Insurance
perspective

16. 16
I’m forecasting the rise of the protection gap due this context
(less human interactions and falling attention span)
Neosurance’s massive transformative purpose is to close the future
protection gap
I invested on them for the productivity potential of their business model
Incremental changes not able to avoid
the rise of the protection gap
On line insurance sales
Comparison web-sites
On-demand insurance apps
Push insurance sales (AI+Smarphone)
Neosurance’s Virtual Insurance Agent
Insurance
perspective

17. 17
The second example is an approach addressing profitability,
proximity and persistency
Insurance
perspective

18. 18
I’ll talk to you about telematics, but I have before to ask you
for the next 15 minutes to forget all you have heard about it
since today
Because telematics is an
extremely powerful technology
able to transform your journey…
…but you have seen it used only
to go to the market
at the end of the street
Insurance
perspective

19. 19
Telematics, what am I talking about?
Telematics device
Blackbox to be installed on
top to the battery for all
the year (self-installing)
Insurance coverage
Auto liability insurance
coverage with 25%
up-front flat discount
Services
Bundle of services with an
annual fee charged to the
customer (50€)
This is the typical product on the Italian market
Insurance
perspective

20. 20
The business case for the client
3% 3%
48%
40%
34%
35%
13%
17%
3% 5%
<200€
200-400€
400-600€
600-900€
>900€
Insurance
market
Telematis
policies
Auto insurance
premium paid 1250 € - 312 €
938 €
50 € 988 €
Discount Discounted
price
Final
Price
Client feeStarting
price
- 75 €
225 €
50 € 275 €
Discount Discounted
price
Final
Price
Client feeStarting
price
300 €
Insurance
perspective

21. 21
2012 2014 2016
3.6 mln of cars with an
insurance black-box fitted-in
Source: Connected Insurance Observatory
>6.3 mln of cars with an
insurance black-box fitted-in
1.3 mln of cars with an
insurance black-box fitted-in
The Italian telematics market are scaling: you can find here
the larger number worldwide of cars connected with an insurer
The penetration was 19% in the last quarter of 2016
The bigger auto insurance player has a penetration >35% on its book
Insurance
perspective

22. 22
Profitability: the insurer’s business case
ITALIAN MARKET
Traditional
bottom line
Risk self
selection
Insurance
perspective

23. 23
Profitability: Telematics on the Italian market have an
impressive self selection effect (acquisition of low risk clients)
MTPL
claims
frequency
-20%
Market
average
(20%)
Claims frequency (district average)
Black box effect
on
claims frequency
(risk adjusted)
Source: ANIA (2014 data), Connected Insurance Observatory
MULTIVARIATE ANALYSIS BASED
ON 87% OF THE MARKET
Black box impact by district
RISK SELECTION
Market
average
-20%
3.0 6.0 6.5%Market
average
4,8%
4.5
Insurance
perspective

24. 24
ITALIAN MARKET
Traditional
bottom line
Risk self
selection
Claims cost
reduction
Profitability: the insurer’s business case Insurance
perspective

25. 25
+100%
Insurer's body shops usage
+5% speed settlement
-11% material
damage costs
Source: Connected Insurance Observatory
Profitability: material benefits achieved by the best practices
using the telematics data on the claim handling process
-18% body injuries
incidence
ITALIAN TELEMATICS
BEST PRACTICES
LOSS CONTROL
MTPL
average
claim cost
-7%
Insurance
perspective

26. 26
ITALIAN MARKET
Traditional
bottom line
Risk self
selection
Claims cost
reduction
Service fees
paid by the
customer
Bottom line
with telematics
Hardware
TSP
Telematics
costs
Discount
to
costumer
Benefits
retrocession
More than 60% of the Italian
to the client)
More than 60% of the Italian
telematics volumes have an
yearly service fees to the
customers (50-100€ charged
to the client)
Intermediary
additional
remuneration
Profitability: the insurer’s business case Insurance
perspective

27. 27
Proximity: some insurers have already reinvented the driver’s
customer journey leveraging on the telematics data
Source: Connected Insurance Observatory
Weather alert based
on geo-localization
5
Antitheft service if
the box registers a
different-than-
usual driving style
3
"Live"
concierge
supporting
navigation
1
Alert if the vehicle exits a
"safe area" (or enters an
"unsafe area") of the city,
defined by the client (e.g.
parental control options)
4
Alert in case
speed limits are
exceeded
2
While driving
In case of crash
When parked Road or
medical
assistance via
dedicated button
8
Simplified claim
notification,
including automatic
form fill-in based
on telematics data
Claim
certification
at client's
disposal
11
12
Highway/
parking area
tolling
6
Automatic
assistance to
the client on
the premises in
case of severe
accident
10
Parking
localiza-
tion
Alert if the car
is hit when
parked
Antitheft service
if the box is
removed/
uninstalled
Alert in case the
vehicle is moved
when the engine
is off (e.g.
tow-away)
15
16
19
Stolen veicle
recovery
21
Street
sweeping
alerts
13
Short-
time
theft
cover Damages
Photo
Claims feature
14
17
Alert if the car
is hit when
parked
18
Bodyguard for
emergency outside
the car when parked
20
Client
assistance and
personalized
case
management in
case of crash
9
NOT EXAUSTIVE
Fuel gas
predictor
7

28. 28
Persistency: the telematics portfolio shows a lower
churn rate
0%
2%
4%
6%
8%
10%
12%
14%
16%
No telematics Telematics
Source: Ivass (2016 data), Connected Insurance Observatory
MTPL
churn rate
-25%
Churn rate
LOYALTY
Insurance
perspective

29. 29
“What is the ROI of the
use case?"
"Does the approach
make sense?"
“What is the best way to
do it at my company?"
• First pilots focused on
one use case
Incubation
phase
Growth
phase
Maturity
phase
Exploration
phase
Learning
phase
Source: Connected Insurance Observatory
2014
• First pilots
• Roll out by few
pioneers
• Pilot phases by greatest
part of players by using a
"me-too" approach
• Only few top players
understand telematics full
potential (UW, claims,
VAS), define their own
approach (e.g. big data)
and push the selling
phase
• Commercial offer
differentiation
• Telematics potential
fully understood and
increased commercial
push by all players
• Differentiating
solutions / providers
over top players
• Telematics approach is
the standard for the
insurance business
• Relationship
consolidation between
top players and providers,
best practices cross-
country diffusion
20122000
Today
Also when it works well, it will not happen overnight

30. 30
The Connected Insurance Observatory is focusing all the
Insurance IoT use cases
The Insurance IoT
Health… Industrial risksMotor… but also Home… Life…
Any insurance solution based
on sensors for collecting data on the state of an insured risk and telematics for
remote transmission and management of the data collected
Connected Insurance

31. 31
The Connected Insurance Observatory started in March the
North American operations
The two Observatories
together will create an
impressive opportunity
to cross-fertilize the
insurance innovation
thoughts across
geographies
More than 25
members have
joined the 2017
edition
8 members have
already joined

32. 32
Observatory's goal Acrivities
The Observatory provides to the participants the best
knowledge available worldwide on Connected Insurance
Scouting and structuring
quali/quantitative knowledge
on Connected Insurance
Sharing a critical point of
view of key trends and
spreading innovation culture
Encouraging stakeholders
discuss experiences and
exchange ideas about
innovation
1. Collection of evidences concerning connected insurance
approaches
2. Researches on consumer expectation and on distribution of
connected insurance products
3.Best practice analysis with market benchmark and
international innovation scouting
4. Three annual collegial events in order to share with
Observatory's Stakeholders ideas and experiences on
connected insurance
5. 1to1 deep dive meetings (workshops) with each Insurance
Company to present and discuss the Observatory's research

33. 33
Ten months dedicated to study and discuss the Connected
Insurance opportunity
Mar Apr May Jun Jul Aug Sep Oct Nov Dic
Research
One to one
workshops
June 16
(first collegial
meeting)
Research
One to one
workshops
October 2
(Second collegial
meeting)
Research
One to one
workshops
One day event
(collegial
meeting)
We are starting the one to one meeting and continuing in parallel the
onboarding of the members

34. 34
Anne Melissa Dowling
Former Director,
Illinois Department of Insurance
A senior and world-renowned Advisory Committee supports the
activities of the North American Connected Insurance Observatory
Steve Anderson
President,
The Anderson Network
Mike Scrudato
SVP Strategic Innovation Leader,
Munich Re America
Paul Carroll
CEO,
Insurance Thought Leadership
Ujjval Patel
Vice President - Research & Strategy
ACORD
Antonio Derossi
Managing Partner Insurance at
Propeller Venture Capital

35. Feel free to contact me to join the journey of
the North American Connected Insurance
Observatory
Matteo.carbone@connectedinsuranceobservatory.com
+393346220378