Let's demystify the IoT insurance fake news. Lesson learned through the work with more than 100 insurers, reinsurers and tech players in 15 different countries.

1. November 30th 2018
IoT & Insurance:
Entering the age of post truth
Matteo Carbone
Founder and Director, IoT Insurance Observatory
Co-founder, Archimede
@mcins_

2. 2
Telematics is
usage-based
insurance
IoT Insurance is about
how to collect data to find a
profitable underwriting formula
It’s is impossible
for an insurer to
charge fees to
customers for
services
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting IoT data into
actionable insights is still a
wish… we are not yet ready to
make smart actions
Telematics are not able to
select risks better than
the credit score
There is no ROI on
Insurance IoT, it is only
premium shrinking
To make insurance IoT
works insurers need to
work with OEMs, GAFA…
Let’s spoil the following presentations of today and tomorrow

3. 3
My experience with IoT insurance
Organizations
In the past 6 years,
I advised almost 100 organizations (Insurer,
Reinsurers, Brokers, Vendors, and Investors) in
more than 15 different countries
on IoT insurance projects
100
Market share
I’ve worked directly with players accounting
for more than 80% of IoT insurance
volumes (number of policies on auto
telematics, smart home, and connected
health/life)
+80%
6 1000
+90 Conferences
I have debated the insurance IoT
opportunity at more than 90
conferences around the word since
December 2015
Papers
I have produced 6 white papers on
Insurance IoT, which have been
co-authored with prestigious
international organizations
(of which 3 are to be published in
the following months)
Hours
Almost 1000 hours discussing
concrete experiences, best
practices and pitfalls with the
executives of the organization
members of the Observatory

4. 4
Telematics and insurance IoT are my passions
Matteo Carbone
InsurTech Investor and co-funder
Founder and Director of the IoT
Insurance Observatory
+11 years strategic consulting
(former Principal with Bain & co.)
Keynote speaker and writer on
insurance innovation
Global InsurTech Influencer
• This Insurance think tank has aggregated more
almost 50 international insurance groups,
institutions and tech firms between Europe and
North America
• The initiative has three concrete outcomes:
‒ The most pragmatic multiclient research
specialized in the insurance IoT domain
‒ One-to-one workshops dedicated to each
member to discuss research outcomes
‒ Plenary symposiums with all the members
together around the same table
I’m helping incumbents to concretely address the IoT opportunity

5. 5
I have created a think tank which provides the members access
to the most relevant insurance IoT knowledge globally
The most pragmatic
multiclient research
specialized in the insurance
IoT domain based on a
constant observation on the
usage of sensors in different
insurance business lines
around the globe
We interpret best practices
and pitfalls for the members
leveraging an experience
built advising almost 100
different organizations in
more than 15 countries on
IoT insurance project
The knowledge is delivered
through workshops
dedicated one-to-one to
each of the organizations
which are members of the
Observatory and plenary
symposiums both in North
America and Europe
Observer Interpreter Storyteller

6. 6
Telematics is
usage-based
insurance
IoT Insurance is about
how to collect data to find a
profitable underwriting formula
It’s is impossible
for an insurer to
charge fees to
customers for
services
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting IoT data into
actionable insights is still a
wish… we are not yet ready to
make smart actions
Telematics are not able to
select risks better than
the credit score
There is no ROI on
Insurance IoT, it is only
premium shrinking
To make insurance IoT
works insurers need to
work with OEMs, GAFA…
Let’s spoil the following presentations of today and tomorrow

7. 7
Discovery have brought the Vitality approach almost 20 different
countries and attracted +19M users…
Source: Discovery

8. 8
…ad they have even launched a mobile-only bank which is
based on behavioral data
Source: Discovery

9. 9
Customers are ready
Source: SSI surveys for the IoT Insurance Observatory, US Customers (homeowners)
What about you?
27,9%
18,2% 14,3% 15,7%
20,9%
29,6%
37,5%
38,8%
28,6%
33,1%
29,6% 31,8%
26,5%
28,6%
29,2%
7,8%
6,1%
14,3%
7,6%
5,0% 9,1%
14,3% 12,9% 9,2%
50-64
100100
18-34
3
2
1 Definitely I’ll
purchase it
100
Over 64
4
100
USA
5 Not interested at all
100
35-49
3.4%
What do you think
about a home
insurance policy
offering a
security/safety system
with an additional
annual service fee
of $240?

10. 10
Telematics is
usage-based
insurance
IoT Insurance is about
how to collect data to find a
profitable underwriting formula
It’s is impossible
for an insurer to
charge fees to
customers for
services
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting IoT data into
actionable insights is still a
wish… we are not yet ready to
make smart actions
Telematics are not able to
select risks better than
the credit score
There is no ROI on
Insurance IoT, it is only
premium shrinking
To make insurance IoT
works insurers need to
work with OEMs, GAFA…
Let’s spoil the following presentations of today and tomorrow

11. 11
More than 99% of the current global insurance telematics
policies receive data form aftermarket devices or apps
Source of telematics data
By number of policies (global market end of 2017)
SMARTPHONE
14%
OBD
26%
WINDSCREEN
3%
SELF INSTALLED
22%
PROFESSIONALLY INSTALLED
35%
Some insurers have developed their after-
market connected insurance strategy while you
were waiting for the OEM data

12. 12
Who is the most reliable player for providing a bundle of an
insurance contract and services?
As of today, you are still the most reliable player
for providing a bundle of insurance coverages and services!
Source: SSI surveys for the IoT Insurance Observatory, US Customers
Auto telematics insurance
(insurance coverage + services)
IoT home insurance
(insurance coverage + services)
13%All the
customers:
Millennials: 23%
5%
8%
56% 70%
59%50%

13. 13
Telematics is
usage-based
insurance
IoT Insurance is about
how to collect data to find a
profitable underwriting formula
It’s is impossible
for an insurer to
charge fees to
customers for
services
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting IoT data into
actionable insights is still a
wish… we are not yet ready to
make smart actions
Telematics are not able to
select risks better than
the credit score
There is no ROI on
Insurance IoT, it is only
premium shrinking
To make insurance IoT
works insurers need to
work with OEMs, GAFA…
Let’s spoil the following presentations of today and tomorrow

14. 14
Many insurers are selling the customer IoT-based
services with an annual fee
REAL CASES
A pet insurance providing a
tracker, preventive treatments
and the right monthly food
needed by each dog
A home insurance product
with additional fees for
telematics services (and
devices rental)
Auto value proposition
enlarged with a suite of
services telematics
based

15. 15
Telematics is
usage-based
insurance
IoT Insurance is about
how to collect data to find a
profitable underwriting formula
It’s is impossible
for an insurer to
charge fees to
customers for
services
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting IoT data into
actionable insights is still a
wish… we are not yet ready to
make smart actions
Telematics are not able to
select risks better than
the credit score
There is no ROI on
Insurance IoT, it is only
premium shrinking
To make insurance IoT
works insurers need to
work with OEMs, GAFA…
Let’s spoil the following presentations of today and tomorrow

16. 16
Self-selected risks due to product features
An auto telematics
value proposition
focused on the
claims monitoring
has a terrific effect
on the acquisition of
low risk clients
Market
average
(20%)
Claims frequency (district average)
Black box effect
on
claims frequency
(risk adjusted)
Black box impact by district
Market
average
-20%
3.0 6.0 6.5%Market
average
4,8%
4.5
REAL CASE
Even if two customers seem to
be equal based on their
characteristics. The one who
accepts the telematics value
proposition is 20% less risky

17. 17
Telematics is
usage-based
insurance
IoT Insurance is about
how to collect data to find a
profitable underwriting formula
It’s is impossible
for an insurer to
charge fees to
customers for
services
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting IoT data into
actionable insights is still a
wish… we are not yet ready to
make smart actions
Telematics is not able to
select risks better than
the credit score
There is no ROI on
Insurance IoT, it is only
premium shrinking
To make insurance IoT
works insurers need to
work with OEMs, GAFA…
Let’s spoil the following presentations of today and tomorrow

18. 18
Reinvented the claim process through the usage of
telematics data
10:40
09/06
10:43
10:58
11:40 13:00
09/07
…Assistance on site,
collection of
additional information
First contact with the client
for assistance, start of
claim management and
responsibility definition
Adjuster operation in the preferred
body shop (geo-located), with crash
information shared with the adjuster
Prompt definition of
the exposure
Digital customer interactions
and claim tracking
Eventual medial visits,
with crash information
shared with the doctor
…
Adjudication and negotiation
leveraging the objective
information obtained form
the telematics data
Settlement and payment$$$
REAL CASES

19. 19
Enhanced the effectiveness of the claim evaluation
and the efficiency of the claim process
Who here thinks that this is a
tool which will bring benefits
to your claim handlers’
activities?
Please raise your hand
Photo credit: UnipolSai
REAL CASE

20. 20
Telematics is
usage-based
insurance
IoT Insurance is about
how to collect data to find a
profitable underwriting formula
It’s is impossible
for an insurer to
charge fees to
customers for
services
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting IoT data into
actionable insights is still a
wish… we are not yet ready to
make smart actions
Telematics is not able to
select risks better than
the credit score
There is no ROI on
Insurance IoT, it is only
premium shrinking
To make insurance IoT
works insurers need to
work with OEMs, GAFA…
Let’s spoil the following presentations of today and tomorrow

21. 21
Discovery Insure have use wearable data to influence life
policyholder for healthy behaviors by rewarding them with a cup
of coffee or a smoothie

22. 22
Telematics is
usage-based
insurance
IoT Insurance is about
how to collect data to find a
profitable underwriting formula
It’s is impossible
for an insurer to
charge fees to
customers for
services
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting IoT data into
actionable insights is still a
wish… we are not yet ready to
make smart actions
Telematics is not able to
select risks better than
the credit score
There is no ROI on
Insurance IoT, it is only
premium shrinking
To make insurance IoT
works insurers need to
work with OEMs, GAFA…
Let’s spoil the following presentations of today and tomorrow

23. 23
These are the same kind of benefits achieved
with the adoption of the credit score decades ago
02
01
03
04
If he like the proposed price for all the
period of coverage, he will purchase the
policy and become a policyholder
He drives and a driving score is
calculated in 2-3 weeks of driving
He receives a quotation based both on
his data - the traditional ones - and his
driving score
A customer (not yet a policyholder)
download the app and fill in his data
TRY-BEFORE-YOU-BUY INSURER ECONOMIC BENEFITS
Positive selection
Attracting the best risks for
each pricing level (leaving the
worst to the competitors)
Premium leakage
reduction
Having all the policies
underwritten with a more
accurate price (smaller
clusters)
The usage of a driving score at the underwriting stage is NOT
usage based insurance

24. 24
A full stack insurtech which is based on this approach has already
achieved the unicorn status
• Auto telematics insurance carrier (founded in 2015)
• $177.5M of funding, last round at $1B evaluation
-
5
10
15
20
25
30
35
Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18
Lemonade
Root
Quarterly gross written premiums ($M)

25. 25
Telematics is
usage-based
insurance
IoT Insurance is about
how to collect data to find a
profitable underwriting formula
It’s is impossible
for an insurer to
charge fees to
customers for
services
Even in the insurance sector, we are in the age of post truth
Customers don’t want
to share data with us
Converting IoT data into
actionable insights is still a
wish… we are not yet ready to
make smart actions
Telematics is not able to
select risks better than
the credit score
There is no ROI on
Insurance IoT, it is only
premium shrinking
To make insurance IoT
works insurers need to
work with OEMs, GAFA…
Let’s spoil the following presentations of today and tomorrow

26. 26
The value creation framework
Traditional
bottom line
Service
fees paid
by the
customer
SERVICES

27. 27
The sustainability of these kind of models is enbled by the
ability to orchestrate the partners’ contributions
Jun-11
Dec-11
Mar-15
Sep-11
Dec-15
Mar-12
Jun-15
Jun-12
Dec-14
Sep-12
Mar-13
Dec-12
Sep-15
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Number of Insured veicles >200,000 cars
Discovery scaled-up its telematics book with a value proposition
based on the promise to receive back up to 50% of monthly gas
spending

28. 28
The value creation framework
Incentives and discounts are ways of sharing with the customer part of the
value created in order to deliver superior value propositions
Traditional
bottom line
Self
selection
Claims cost
reduction
Service
fees paid
by the
customer
Bottom line
with
IoT
Discount
and
incentives
to the
costumer
Value
sharing
Intermediary
additional
remuneration
Risk
reduction
Partners
contribution
More
accurate
pricing
Hardware
Services
Telematics
costs
SERVICES RISK
SELECTION
LOSS
CONTROL
BEHAVIORAL
CHANGE
RISK-BASED
PRICING

29. 29
RISK SELECTION:
• Low-risk customer acquisition due to the storytelling
of the IoT insurance product
• Improved quality of underwriting process based on
sensors data (including constant insights on exposure)
• Increased underwriting process efficiency
RISK-BASED PRICING
• More accurate rating: based
on measured "quantity"
and "level" of risk exposure
• Value propositions more
attractive to the customers
BEHAVIORAL CHANGE
• Indirect impact on risk level through:
-positive behavior reinforcement
(including gamification)
-culture creation
• Loyalty systems based on detected
behaviors (retention of low risk clients)
LOSS CONTROL
• Usage of the device information in order to anticipate claim
management and improve reimbursement valuation
• Initiatives acting directly in real-time on single situations to:
-mitigate risks before damages occur
-contain damages
• LAE reductions
• More accurate reserving
Value
Creation
Levers
IoT data have a extraordinary impact on the way you assess,
manage and transfer risks
SERVICES…
• …based on sensor data to deliver enlarged value propositions
for the clients orchestrating an ecosystem of partners
• …concerning information about insurance coverage and
insured risks

30. 30
I’m supporting this evolution through the Observatory

31. 31
I’m extremely proud to have served these prestigious
organizations through the IoT Insurance Observatory on 2018
To join the Observatory feel free to write to matteo.carbone@IoTinsObs.com