Innovation - the right response to the technological challenge

The driverless revolution in the auto industry is already buzzing along city streets around the world, in a variety of tests and trials—and not just for cars, but for 18-wheel delivery trucks loaded with beer. Yet the excitement surrounding the emergence of autonomous vehicles tends to overshadow another tech revolution underway: the addition of dynamic cognition layers that will enable cars to care for human comfort, information and entertainment preferences in new and unimagined ways, say the Watson IoT team.

In fact, professionals creating the IBM Watson IoT Automotive solutions believe that "today's cars are moving data centers with onboard sensors and computers that capture information about the vehicle that can be accessed in real time." Cognitive cars, more or less describable as high performance computers on four wheels, will enable a limitless portfolio of use cases, but will also require a completely approach in insurance terms.

"By 2025," according to a study by IBM, "our cars will be sophisticated enough to self-diagnose repairs and communicate with other vehicles but also manage their internal environment, managing each person's preference for entertainment and work productivity. That is valuable time drivers will re-acquire once relieved of the attention burdens of driving. On the road, everyone will get more hours back in their day to do what they want and not stress out in traffic." By 2020, there will be a quarter billion connected vehicles on the road, enabling new in-vehicle services and automated driving capabilities, according to Gartner, Inc. During the next five years, the proportion of new vehicles equipped with this capability will increase dramatically, making connected cars a major element of the Internet of Things (IoT). Gartner forecasts that 4.9 billion connected things will be in use in 2015, up 30% from 2014, and will reach 25 billion by 2020.

"The connected car is already a reality, and in-vehicle wireless connectivity is rapidly expanding from luxury models and premium brands, to high-volume midmarket models," said James F. HINES, research director at GARTNER. "The increased consumption and creation of digital content within the vehicle will drive the need for more sophisticated infotainment systems, creating opportunities for application processors, graphics accelerators, displays and human-machine interface technologies," said Mr. HINES. "At the same time, new concepts of mobility and vehicle usage will lead to new business models and expansion of alternatives to car ownership, especially in urban environments."

GARTNER forecasts that about one in five vehicles on the road worldwide will have some form of wireless network connection by 2020, amounting to more than 250 million connected vehicles. The proliferation of vehicle connectivity will have implications across the major functional areas of telematics, automated driving, infotainment and mobility services.

From a user perspective, one may expect his/her car to offer an experience similar to the smartphone use. Yet, a car is by far a more complex and presents far more complicated questions for designers and engineers when it comes to interpreting human intentions than a smartphone or a tablet, as not only it is used by different passengers, but even the regular ones may have different destinations in mind, a variety of reasons for making a trip and different moods. "While cars are far more complicated than a smartphone or tablet, the actions of the people using it—along with information from the multitude of sensors in the vehicle as it operates—provide a trove of data that can be used to enhance the overall experience. This includes everything from active safety solutions to orchestrating the trip for efficiency, allowing users to reclaim time they would have otherwise wasted. All of this information will power the new cognitive layers of in-vehicle technology," reads an articles published by the IBM Watson IoT Automotive division.

On the other hand, this high wave of data not only may also be used for insurance purposes, but has the potential to change the indutry itself, bringing its functioning philosophy to a complet new level. In fact, as a study of the IBM Institute for Business Value concludes, "data generated by the Internet of Things can fundamentally change the way insurers protect policyholders. But when lifestyle and behavioral information is supplemented by other data sources like weather, traffic and healthcare, the volume of information is staggering." As a result, more than more data, insurers need better and more powerful tools to aggregate and analyze all of this data to proactively shield people and their property.

Looking back, its seems that after a long time, this the first moment in which the regulation ceased to be the main industry impacting force. Insurers would do well to accelerate the rate at which they embrace innovation, yet few do so at a satisfactory level. Lack of skilled human resources and inadequate funding are the top reasons mentioned by the insurance executives for the industry's hesitating attitude toward the rap;id yechnological change. Another top barrier to innovation is the conservative culture of the insurance industry, which discourages trial and error - an essential element of successful innovation.

For the time being, according to the IBM Institute for Business Value study:
  • Only 23 percent of insurance leaders provide a clear impetus for innovation
  • Only 19 percent of insurance leaders have a specialized innovation department
  • Only 18 percent of insurance leaders measure innovation outcomes
Yet, "shrinking premiums in a slow economic environment, rapidly changing customer expectations and behaviors, and unprecedented technological advancement are changing the game. Insurers can no longer count on barriers to entry to protect them, as emergent forces of change gnaw away at traditional business models. They need a more systematic approach for driving innovation across their organizations, cultures and processes," concludes the study.

The IBM Institute for Business Value study, "Innovating insurance Lessons from the world's leading innovators" is available here.

Follow XPRIMM Publications on LinkedIn, for more data on the insurance and financial industry.

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