INTERVIEW: Matteo CARBONE Founder and Director IoT Insurance Observatory
Matteo CARBONE: From my point of view, the maturity of a telematics market - as of today - is due more to the actions of the market participants than to the market characteristics. It was obviously true 10-15 years ago that the cost of a professionally installed telematics solution required a pretty high level of auto insurance premium to allow an insurer to build a use case with a positive ROI. This was the reason why telematics started in Italy, the UK, and the US. However, nowadays you can choose between many different telematics solutions at any cost level - from expensive cameras with AI to inexpensive smartphone apps - so an insurer in any market can find a way to create a use case with a positive ROI. I've worked in more than 15 different insurance markets - including some CEE countries - and everywhere any head of a motor insurance business line would love to have objective information about a crash, improve the driving habits and reduce the distraction of his policyholders, benefit from a self-selection that pushes back the worst risks at each pricing level, have insights to better price risks at the underwriting stage or at renewal, and receive additional fees from the clients for value-added services. Today, a few best practices around the world - from Rome to Johannesburg, from Vienna to Chicago - are doing this, and each of them is using this technology differently. Telematics is only a tool; each player can use it in the way that fits better with a strategy. I don't see definitive barriers for the adoption in any market, it is only a matter of knowledge, culture, and execution within each organization in order to make it happen.
XPRIMM: Motor insurance holds a significant share of the CEE insurance business and one would probably expect that this would be the market segment where the regional market's digitalization begins. On the other hand, most national passenger cars fleets are rather old, so most probably telematics and other similar new technologies' entrance will depend much on the new cars sales evolution. In your opinion, what would be the best approach for technological advancement in these markets?
M.C.: I don't agree with the need to wait for the new cars. I've worked through the IoT Insurance Observatory and directly with players that account for more than 80% of the 14 million insurance telematics policies that sent data to insurers around the world in 2017. I can confirm that more than 99% of the portfolios I have seen are based on aftermarket telematics solutions, which could be a telematics device or an app. So old cars are perfectly fine, the age of the car fleet is not a good excuse for waiting to think about telematics.
XPRIMM: InsurTechs, initially seen as the rapidly evolving competition for traditional insurers, have lately become an acquisition target for many big insurers which are rather trying to partner and integrate such initiatives into their existing structure, probably as a first step towards a gradual digital transformation. How do you see the future in this respect?
M.C.: I think all the successful players in the insurance arena will be InsurTechs in the future, meaning organizations where technology will prevail as the key enabler for the achievement of their strategic goals. I have written a book dedicated to this thesis (All the Insurance players will be InsureTech), and I have even co-founded a special purpose acquisition company which has raised USD55 million and is going to create the first Italian insurance carrier, InsurTech inside. So, as you mentioned, we will see more and more insurance incumbents in any markets embedding technological innovation into each step of their value-chain. It will be a mix of commercial relations, structured partnerships, acquisitions, and even internal developments.
XPRIMM: Most of the CEE markets are dominated by the subsidiaries of large European insurers, such as Allianz, Generali, Uniqa, VIG etc., each of them with its own policy/strategy in the digitalization area. According to your knowledge, do these groups tend to simply extend their strategy to their CEE units or do they have a different approach, taking the local culture into consideration?
M.C.: About that, I would like to share two thoughts which apparently contrast each other, but which need to be simultaneously integrated in the strategy of each international group. First, insurance is a local business. The reasons why customers purchase an insurance product, the distribution channels used to purchase it, and the characteristics of this insurance contract are all inextricably linked to local laws, business habits, and components of public welfare. On the other side, there are many opportunities to leverage other subsidiaries experiences, or solutions that have been tested and adopted by international colleagues. I think all the international Groups clearly know that the copy & paste approach has never worked, but that there are also (and there will be more) extremely relevant opportunities for sharing ideas and lessons learned in order to inspire people working in different local companies. This kind of exchange of ideas between professionals with robust knowledge in their domain can generate terrific virtuous circles within the group. In the last three years, I've worked with more than 60 different Insurance Groups and I have seen incredible positive innovation energy inside all their subsidiaries. It is a matter of promoting and channeling this energy.
XPRIMM: Lately, some CEE countries - Poland, for one - have become the "birthplace" for numerous tech ventures and a tech talent pool used by many big international players in the digitalization field. How do you see the region's perspectives as FinTech/InsurTech provider?
M.C.: If it has happened in FinTech, I don't see any relevant reason for this experience not to be replicated in InsurTech.
XPRIMM: As one of the investors at Spac Archimede, an InsurTech insurer focused on the bancassurance channel - how do you see the attractiveness of the bancassurance business in the CEE region? What would be the best approach for this market to boost sales through bancassurance using technology?
M.C.: I consider the bancassurance channel an attractive option for the insurance distribution for life and even for property & casualty. Life insurance is a product closer to banking products (it is mainly a savings or retirement insurance product in Europe) and the bancassurance channel is extremely relevant in the life insurance distribution in many European markets. However, when you want to distribute a property and casualty product there are two key needs. First the need to drive the activities of the salesmen in the branch, both in order to propose the right coverage to right person and to perform the risk selection traditionally done by specialized intermediaries such as agents and brokers. Second the need to manage the claim moment. About the second aspect, centralized processes have already demonstrated to be good enough in the French bancassurance experience and technology allows for further improvements. But I see a tremendous opportunity to leverage the data and touchpoints of the transactional banking products in order to propose the right insurance coverage to the right customer, at the right time. I've invested in an early stage startup - Neosurance - which has developed POCs with a couple of European Banks to drive the activities of salesmen in the branch. This kind of tool will be more and more relevant in the European markets due to the IDD.
About IoT Insurance Observatory
The IoT Insurance Observatory is the first insurance think tank specialized in insurance IoT. The North American Observatory started activity on March 2017 and have already aggregated more than 20 members, including 5 of the top 15 P&C US Insurance Groups. The European Observatory (third edition) has aggregated more than 30 members Insurers, Reinsurers, Institutions and Tech players.
Insurance IoT Observatory is about connecting people and ideas in order to spread innovation culture over the insurance market with three concrete outcomes: a global multiclient research; three workshops delivered to each member; Plenary symposiums.
Insurance IoT Observatory's goal is to help members address the insurance IoT opportunity to improve insurance profit & loss and allow insurers to share part of this value with the customer, in order to increase product adoption. It enhances proximity and interaction frequency with the customer while creating a new customer experience, increasing retention, and expanding relationships.