1. February 17, 2016
Innovation Trends in 2016
Summary:
Italian firms have set up a telematics "observatory"
to promote innovation on home, health and
industrial risk, as well as cars.
By: Matteo Carbone
For the past few years, the innovation rate in the global insurance industry has run at peak
levels, in good part because of digitization, which continues to be a pervasive influence?if not
as disruptive as early projections. Initial expectations of a departure from traditional distribution
channels turned out not to be the case. Clients preferred direct, personal contact when buying
insurance products. While online channels have not generated major changes?for example, in
the vehicle insurance sector in Italy (5% of premiums15% of all insurance policies today in
Italy. (These policies did not exist in 2002.) Digital transformation is, of course, leaving its mark
in four macro areas. First, consumer expectations: A Bain survey suggests that more than
three out of four consumers expect to use a digital channel for insurance interactions. Second,
product flexibility: The traditional Japanese player, Tokio Marine, for example, started
offering temporary insurance policies via mobile phone, e.g., travel insurance limited to the
dates of travel and personal accident coverage for people playing sports. Third, ecosystems:
They are created when the insurance value proposition depends on collaboration with partners
from other sectors. For example, when Mojio sells a dongle (at, say, a supermarket) that
requires connection to an open-source platform to be installed in a car, third-party suppliers
are able to extract driving data from that platform and create services based on it. Onsurance,
for one, offers tailor-made insurance coverage based on the data collected. Fourth, services:
Insurers today are moving away from the traditional approach of covering risks to a more
comprehensive insurance plan, which includes additional services. Connected insurance: a
telematics ?observatory? to promote excellence The fact that the Italian insurance market
represents the best of international automotive telematics practices gave rise to the idea of
creating an ?observatory? to help generate and promote innovation in the insurance sector.
Bain, Ania, Aiba and more than 25 other insurance groups are among its current participants.
The observatory has three main objectives: to represent the cutting edge of global innovation;
to offer a strategic vision for major innovation initiatives while reinforcing the Italian excellence
paradigm; and to stimulate research and debate concerning emerging insurance issues such
as privacy and cyber risk. The Observatory on Telematics Connected Insurance & Innovation,
will focus not only on vehicle insurance (where Italy has the highest penetration and the most

2. advanced approach worldwide), but on additional important insurance markets related to
home, health and industrial risk, which, I am convinced, represent the next innovation wave.
Italy is currently the best practice leader in connected insurance. Italian expertise in vehicle
telematics is finding applications in other insurance areas, particularly in home insurance?
where Italy is the pioneer?and in the health sector, where we recently launched our first
products. InsurTech on the rise Another sector that has seen an increased number of
investments in 2016 is InsurTech. Until last year, attention focused on many types of financial
service start-ups. Today there is significant growth in investments in insurance start-ups:
almost $2.5 billion invested in the first nine months of 2015, compared with $0.7 billion in 2014
[according to CB Insight]. Many new firms are entering the sector, bringing innovation to
various areas of the insurance value chain. The challenge for traditional insurers will be to
identify firms worth investing in, and also to create the means for working with those new
players. The challenge is integration Ultimately, the main challenge for insurers will be to find
ways to integrate the start-ups into their value chains. The integration of user experience and
data sources will be key to delivering an efficient value proposition: It is untenable to have
dozens of specialized partners with different apps in addition to the insurer?s main policy. It will
be necessary to manage the expansion and fragmentation of the new insurance value chain.
To come up with an answer to this problem, start-ups are generating innovative collaborative
paradigms. One example is DigitalTech International, which offers companies a white-label
platform that integrates various company apps and those of third-party suppliers into a single
mobile front end, even as it offers a system for consolidating diverse client ecosystems
(domotics, wearables, connected cars) into a single data repository. Integrating and managing
complex emerging ecosystems will be one of the greatest challenges in dealing with the
Internet of Things (IoT) for the insurance industry. (A version of this article first appeared on
Insurance Review.)

3. Matteo Carbone
carbonemat@gmail.com
Matteo Carbone is currently working in Bain Financial Services practice
and has spent most of his time advising many of the primary players on
the Italian market. Carbone is recognized by the client and team as an
expert on key issues and emerging trends in the insurance and wealth
management sector.