In the Value Proposition workshop I ran last week at Startupbootcamp IoT and Data, it was clear it is tough for startups with broad applications to decide which industry they should focus on. If your startup has a platform technology such as new sensors, algorithms, wearables or artificial intelligence tools, which industries should you be looking to build your first specific proposition for?
As investment in insurance tech increased by 9X in the last year, it’s an attractive space for IoT and data startups to apply their technology to; if you’re one of them, here are the three main shifts in the industry you need to know about.
First, IoT and data startups are positioned to make the existing insurance model more efficient. Insurers’ business is fundamentally about collecting and analysing information across people. This data collection has traditionally happened as a one-time event, based on limited demographic information such as age. Now, the industry is set to shift from modeling risk as a one-time event, to measuring it continuously. IoT technologies and data analytics can now show how the customer behaves in real-time, so premiums can be set and adjusted to how safely you actually drive, or how healthy your lifestyle is.
Insurers sense the opportunity for a huge advance – experts I’ve talked to predict this will result in a 10-30% increase in prediction accuracy. However, many insurers are so far behind startups on innovation capabilities to make this happen that they don’t even call their teams ‘innovation departments’, but ‘strategic risk management’ groups. This reflects the industry mentality that has been focused on managing risk, but now needs to find new ways to engage with their clients by managing opportunities.
This is where a second shift in the industry comes in. Insurers that lead in innovation are beginning to see that they can create new value-adding experiences for customers, beyond just making the old model mode efficient. These insurers are moving from compensating for when something goes wrong, to preventing those adverse events from happening. For example, instead of receiving compensation after your health deteriorates, their new role will be to reduce the chance of heath issues occurring. IoT and data can play a role as a digital assistant in helping people reduce their risks, which is good for the insurer and the customer!
For example, Generali are launching a programme called Vitality for health and life insurance which helps people live healthier lives. Users can opt to let the Vitality app collect data on how often they go to the gym, on how healthy the food they buy is, or whether they’re going to preventative medical appointments, in exchange for discounts which help them to do these things. Whether you’re building a wearable, AI, or data management platform, there are opportunities to partner as part of these new experiences.
Third, and relatedly, insurers are looking to improve their distribution systems – that is, how they reach customers and how visible they are in customers’ lives. Insurers are under pressure from tech giants who also want to handle people’s health data (e.g. Google Fit, Apple Health), and are looking to startups to help them compete technically (e.g. Misfit, Jawbone). I learn from a global insurance company executive that “from a marketing perspective, we need to keep the customer relationship; from a technical perspective, this isn’t feasible”. As insurers battle with tech giants to access personal data, insurers are interested in startups that can help them gather it.
All of this will only be possible, however, if people are willing to share their data with insurers. And people will only be willing to share their data if it creates value for them. So far, this has been the sticking point, and it is why insurance tech hasn’t taken off as fast as predicted, despite the investment pouring in. When I discussed this with Generali’s global head of digital transformation, Moshe Tamir, he explained:
“the reason for the adoption rate is not the telematics technology itself. You need to find a model which is sharing the value with the customer. What is their incentive to share their data and be measured? When people are driving they also care about being safe and about getting to their destination faster. When people break their camera, they don’t want to receive $200 compensation…they want immediately to have a new camera to keep taking pictures! We need to think about how these useful technologies become great user experiences that provide the benefits that customers really want”.
If your startup is increasing accuracy through data collection and analysis, helping prevent adverse events by creating healthier lives, better driving, or safer homes, or providing a new channel for interacting with the customer, the insurance industry is a promising partner to consider – if you can eventually add value to the end user. Where insurance has often felt like a ‘lose-lose’ (customers and insurer each feel the other is trying to trick them), insurers will have to create win-win experiences – with the help of startups.
Join us for Startupbootcamp IoT & Data next year if you’re an IoT or data startup looking to build a business that appeals to industry and end-users.