Onramp key takeaways: 1) Same Insurtech brutal truths 2) The future of the Insurers will be insurtech 3) Reasons why for adopting IoT in the insurance sector 4) The IoT Insurance Observatory mission

1. April 12th 2018
Connected insurance paradigm
Matteo Carbone
Founder and Director, IoT Insurance Observatory
@mcins_

2. 2
Why have we to talk about insurance innovation?
Insurance is about protecting the way people live
Since 1347 Insurance has been 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
Insurtech can make the insurance sector stronger and therefore more
capable of achieving its strategic goal: to protect the way people live!
How can
InsurTech
help do
this?

3. 3
Some insurtech storytellings are terrific
Let be frank: frequently these are whishes, not current capabilities!
“if Lemonade is 80% cheaper it must lose
money on every policy. That is not true”
“we also apply behavioral economics to
reduce fraud”
“we’re playing a version of the trust game”
Note: Claims ratio are gross of reinsurance
161% loss ratio vs 75% market average
$1.6 paid for each 1$ earned
“we aren’t the first company to use telematics.
We’re just the first to do it right”
“we using data and technology to…give good
drivers the rates they actually deserve”
“founded in the principle of fundamental fairness”
156% loss ratio vs 71% market average
$1.6 paid for each 1$ written

4. 4
All the insurance players will be InsurTech
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 of the
achievement of their strategic goals
Insurtech is the “superpower” for
assessing, managing and transferring risks

5. 5
I love insurance
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
than 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

6. 6
Why is IoT relevant to insurers?
Today more than 1 connected
device per person in the world
You can leverage these sensors or ignore them!
In 2025 more than 10 connected
devices per person in the world
In 2050 …
The world will be more and more connected, you can not stop that

7. 7
The most pragmatic
multiclient research
specialized in 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
I have created a think tank which provides to the members the
access to the most relevant insurance IoT knowledge globally

8. 8
The protection of a connected home: how could it look in a
few years?
The prevention of the
risks which could occur
to the house
Proactive actions to
limit the damages
and fix them
The monetary
reimbursement will be
necessary only in case of a
"service failure"
For a monthly fee someone will offer the consumer:

9. 9
Will Insurers be relevant in this kind of future? ILLUSTRATIVE
Supermarket
Relevance
Frequency
Hair dresser
Telecom operator
Traditional insurer
Doctor
Dentist
Social media
Real estate agent
Notary
Search engine
Bank
Credit card provider
Lower risks to
cover, invisible
insurance ancillary
to a product
purchase, …)

10. 10
In 2017, I had more than 350 hours of discussions with the
Observatory members around the globe
Think Tanks
One focused on the
North American markets and
one dedicated to the
European markets
2
Organizations
Involved hundreds of executives
from almost 35 Insurance and
Reinsurance Groups and 15 Tech
players and Institutions
50
Plenary meetings
6 full days of keynote
speeches, discussions,
roundtable.
A terrific networking
opportunity
6
Hours of workshop
More than 120 "one to
one" workshops
(meetings dedicated to
each company which has
joined the Observatory)
>350
4
Business insurance areas addressed
Unique research based on innovation
thought leadership and insurance acumen
on all insurance business lines

11. 11
Will Insurers be relevant in this kind of future? ILLUSTRATIVE
Supermarket
Relevance
Frequency
Hair dresser
Telecom operator
Traditional insurer Insurance Iot
Doctor
Dentist
Social media
Real estate agent
Notary
Search engine
Bank
Credit card provider
Irrelevancy is only a choice for an Insurer, not his inevitable destiny!
Insurance IoT is
about connecting the
insurance sector with
clients and their risks
Lower risks to
cover, invisible
insurance ancillary
to a product
purchase, …)

12. 12
One Observatory member has chosen to proactively address the
threat of the future of mobility
Mobility a service: this Insurer has taken the bull by the horns!
REAL CASE
Roadside assistance,
maintenance, crash support a
bundle of other services
telematics based
Full coverage auto insurance
with 0 deductible
(personal line priced on
driver and car characteristics)
For a monthly fee its tied agents are offering the consumer:
A new car
(with a 24/60 months
contract)

13. 13
IoT is an incredible opportunity for the insurance sector
IoT improves insurance profit & loss and allows insurers to
share part of this value with the customer in order to
deliver superior value propositions
It enhances proximity and interaction frequency with the
customer while creating new customer experience,
increasing retention, and expanding relationships
Value
creation
Interaction
frequency
2
1

14. 14
Each Insurer can create and sell his own insurance IoT value
proposition: insurance contract + IoT data + services
The Insurance players have a unique competitive
advantage vs any other IoT players:
• Because the same data used to deliver services allows to
improve the insurance activity (assess, manage and transfer
risks)
• This way IoT allows to create value on the insurance P&L
• this value can be shared with the client creating a valuable
bundle between insurance coverages and IoT solutions
Value sharing
Connected
insurance
pardigm
The bigger the difference between insurance premium and
service cost, the higher the potential of the insurance IoT

15. 15
Value
Creation
Levers
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
IoT data can have a extraordinary impact on the way
you assess, manage and transfer risks

16. 16
Earned additional service fees
A home insurance
product with annual fee
for the professional
safety and security
services (and device
renting), integrated with
optional property services
offered “a la carte” by an
ecosystem of partners
REAL CASE
Safety/Security
oRemote monitoring and
emergency services (all
the solutions discussed
before to prevent and
mitigate insured risks) to
provide peace-of-mind
Property services
oConcierge with a platform
of certified services
providers to manage the
house:
‒ Home maintenance
‒ Home services (cleaning,
gardening, ironing …)
‒ …
Solar panel
Lighting
Intrusion
alarm
Heating/
cooling
Thermostat
Flower
control
Computers &
electronics
Mould detector
Camera
Refrigerator
and freezer
Fire detection
Camera
Lock
Electric meter
Vacuum
cleaner
Washing
machine
Heat
exchanger

17. 17
The value creation framework
Traditional
bottom line
Hardware
Services
IoT
costs
Service
fees paid
by the
customer
Partners
contribution

18. 18
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
Value
Creation
Levers
IoT data can 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

19. 19
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

20. 20
The value creation framework
Traditional
bottom line
Risk self
selection
Service
fees paid
by the
customer
Partners
contribution
Hardware
Services
IoT
costs

21. 21
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
LOSS CONTROL
• Usage of the device information in order to anticipate claims
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 can 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

22. 22
Enhanced the effectiveness of the claims evaluation
and the efficiency of the claim process
Claim dynamics reconstructed
through telematics data are
represented “near real time”
to the claim handlers on their
desktops
Photo credit: UnipolSai
REAL CASE

23. 23
The value creation framework
Traditional
bottom line
Risk self
selection
Claims cost
reduction
Service
fees paid
by the
customer
Partners
contribution
Hardware
Services
IoT
costs

24. 24
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
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 claims
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 can 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

25. 25
Nudged clients to less risky behaviors
Instant reward to
life policyholders
for performed
healthy behaviors
REAL CASE

26. 26
The value creation framework
Traditional
bottom line
Risk self
selection
Claims cost
reduction
Service
fees paid
by the
customer
Change
of behaviors
Partners
contribution
Hardware
Services
IoT
costs

27. 27
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 claims
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 can 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

28. 28
Reduced the premium leakage
12.00
24.00
20.00
6.00
Cheap telematics auto
insurance for teenagers,
eventual night hour driving
charged on top on their
credit card by km
REAL CASE

29. 29
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
Risk 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
Change
of behaviors
Partners
contribution
More
accurate
pricing
Hardware
Services
IoT
costs

30. 30
IoT is an incredible opportunity for the insurance sector
IoT improves insurance profit & loss and allows insurers to
share part of this value with the customer in order in order
to deliver superior value propositions
It enhances proximity and interaction frequency with the
customer while creating new customer experience,
increasing retention, and expanding relationships
These approaches create and consolidate knowledge about
risks and the customer base which will lead to the next
generation of products, but also enable further data
monetization opportunities through the creation of ecosystems
Value
creation
Interaction
frequency
Knowledge
creation
2
1
3
Insurance IoT enables a new virtuous role for Insurers by
providing positive externalities for a more sustainable
society
Sustainability4

31. 31
Who is the more reliable player for providing a bundle of an
insurance contract and services?
You are the more reliable player for providing a bundle of
insurance coverages and services !
Source: SSI survey for the IoT Insurance Observatory, US market
Auto telematics insurance
(insurance coverage + services)
IoT home insurance
(insurance coverage + services)
13%All the
customers:
Millennials: 22%
5%
8%
56% 70%
59%54%

32. 32
I believe (some) insurers will succeed in the IoT war and they
will stay relevant in the life of their clients
These insurers will create their insurance IoT proposition:
insurance contract + IoT data + services
Photo credit: Jay Byers

33. 33
I’m supporting this evolution through the Observatory
Objectives
Scouting and rationalizing
qualitative/quantitative
knowledge on Insurance IoT
Sharing a critical point of view of
key trends and spreading
innovation culture
Encouraging members to discuss
experiences and exchange ideas
about innovation
The scope
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
Health
and life
Industrial risks and
workers’ comp
Auto… Home and
commercial property

34. 34
We have just started the activities of the 2018 Observatory edition
Mar Apr May Jun Jul Aug Sep Oct Nov Dic
Research One to one workshops
Research One to one workshops October 1nd
Research
One to one
workshops tbd
May 15th
Jan Feb
April 17th
Tbd
Research
One to one
workshops
Research
One to one
workshops
Research One to one workshops
tbd
European
North
American
European
North
American

35. 35
I’m proud to serve these 16 Organizations with the North American
IoT insurance Observatory
To join the Observatory feel free to write at matteo.carbone@iotinsobs.com