In a recent blog we highlighted the huge potential for the 5G mobile spectrum and some specific new use cases for motor telematics and vehicle to everything (V2X) communication, on the road to the autonomous vehicle. The recent debate in the UK on the 5G mobile auction has also highlighted what an important part of the digital infrastructure this is going to be, forming the enabling platform for the next generation Internet of Things (IoT), and of course, smart insurance.
In terms of cities, public authorities and the mobile operators working together, there has been a lot going on recently, creating new capacity, latency and infinitely lower costs, all factors that are going to impact on how insurance companies interact with sensors and other new data sources. There are going to be many new types of relationships necessary to turn our bricks-and-mortar cities into truly connected cities.
The European Commission has created Watify, a non-profit initiative aimed at mobilising billions of euros for the digital economy through business matchmaking, awareness programmes and help for SMEs, generating over 1.5 million jobs.
The TM Forum has launched its City as a Platform Manifesto, introducing the concept of the city as a hub, in a system of connected ecosystems. It is being endorsed by 40 major cities around the world, along with regional and international government bodies, telecoms operators, technology firms and associations.
The manifesto sets out ten key principles designed, the TM Forum claims, to bring private and public sectors together when deploying digital city platforms. Its main thrust is around the desirability of openness, standard APIs and collaboration. These are important considerations, taking into account forecasts that the world’s urban population is growing from 54% of the total population today, to 66% by 2050.
For property and motor insurers meanwhile, there’s a need to think differently, considering the new sources of data coming in volume, and with a velocity and variety never seen before.
In the UK now, 15% of homes have no fixed line connection and the young generation in particular are choosing to transact everything by mobile device. The number of connected ‘things’ or IoT devices globally – from smart building sensors, meters, personal wearables to motor telematics devices – is growing sharply from just over 6 billion last year to over 20 billion in 2020.
In many ways the existing structure is not going to work. There are new disruptive business models approaching and issues around the future mobile capacity.
Cities becoming a hub of hubs
There’s a sense that 5G is too important to be left to just a simple mobile auction, as UK governments have done in the past.
It is something that has almost limitless demand and there are some things that can only be done with a new and better standard. In one interesting example, Aberdeen in Scotland recently became the first European city to launch a multi-operator small cell network in the city, powered by an infrastructure network of lampposts and other city street furniture, able to deliver an extremely fast and dense mobile service.
For usage-based insurance, with this kind of real time data flowing into systems, the risk that gets written at the beginning of the relationship with the customer is not necessarily going to be the final risk underwritten. With motor telematics – and even more so for the relationships needed to deliver alerts and services for the smart home – the schematic of the partnerships required is going to become more complex.
From the point of view of the consumer, the smart home right now presents a complex array of technology without a clear link to insurance, other than some potential alerts for fire, carbon monoxide, escape of water or intruder alerts. People want to feel safe in their home and they are prepared to pay for new services. But it’s clear the insurance industry needs to start communicating better if it wants to stay one step ahead of the energy companies and others moving into this protection space.
In smart city developments so far, there’s a key element not yet happening, which is the curation of data across the whole ecosystem, able to bring together multiple data producers and multiple data consumers – who can all use the data to make ends meet. In motor telematics our LexisNexis Telematics Exchange was launched with this type of goal, to solve the interoperability issues of different partners coming together: hardware, software, vehicle OEMs, insurers and brokers.
Looking at recent statements from the world’s major cities, we can expect to see more work to come, to federate the data, with better collaboration between planning authorities and other local stakeholders – making the data available to build an even larger market.
Conclusions from the Smart Insurance Summit
This subject of growing the data economy, and how insurers can intersect with it, was one of the themes at the recent Smart Insurance Summit.
There was agreement in the conference that the data is both a challenge – and a fantastic opportunity – for the insurance industry. There is a big prize on the horizon, which is the fully connected city delivering new types of safety technologies that will, in turn, impact on the nature of insured assets (vehicles, mobility, properties, cyber and digital assets).
“You can’t have an industrial strategy without a digital strategy,” commented Julian David, CEO of Tech UK. “And you can’t have a digital strategy unless you address infrastructure, including things led by local authorities and government.”
There is a need to create the right relationship for the future with consumers. With GDPR coming, there’s a need to look closely at all the data in the insurance business, to be aware, to audit the data trail, including all data collected incidentally, and consider the questions, where is it, and why is it being collected?
The combined value of data generated by insurance companies in common, is immensely greater than the sum of the values each one could separately provide. Data is playing an increasing role in the nature of risk, and how the risk is changing.
Take claims data for example. New opportunities for insights are going to be available from pooled industry data, putting IoT solutions in place by using predictive analytics (for example looking for causation related to fire or escape of water incidents). Once the data is brought into processes and understood, it can be used to determine new business cases, such as when it makes sense for insurers to subsidise the cost of home sensors, and encourage their use.
“What we are witnessing is a paradigm shift,” said Cecilia Sevillano, Head of Smart Home Solutions at Swiss Re.
“With technology, consumers are really becoming empowered to control losses and control the home…..Consumers want an experience and they want to be safer in the home. But they don’t care if this is provided by an insurer or not. So it is a very important moment for insurance.”
James Tucker, Manager of Smart Solutions, Allianz, commented on the evolution of motor telematics – the definitive example of real-time data for insurance – which has focused primarily on the young driver market since its introduction in around 2004, based on cost reductions and premium discounting.
“If we think of motor telematics, the measurable technology is only going to get better and better. But how can the future be only about more and more discounts? The future will be about extracting more value from the data, to drive penetration,” said James Tucker.
“Looking at where to add value, we have to acknowledge that the business model has to change and it has to be more than just about discounts,” he said. “In the smart home, there will probably be a few unique insurance players who will dominate, a bit like smart phones where the industry has concentrated to just a few operating systems.”
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