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Changing Nature of Risk

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Latest featured Advisory:

IoT Deep Dive  (Mar, 2019)

Connected devices are changing how we do business. This 'deep dive' helps agents, carriers, and vendors understand the impacts across insurance lines of business, and what we all need to do to move forward. 
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Connected devices are changing how we do business. What do you need to know about IoT for personal, commercial and life-health clients.
The impacts of IoT on commercial insurance can be as varied as the many types of businesses that purchase commercial insurance.
For both Life and Health sectors, IoT and wearable biosensors offer the potential to provide more information offer better insights, improved efficacy and preferable outcomes of better health and longer life.
IoT is more than just a buzzword - It is very broad in scope and very pervasive in its nature. It isn’t about one technology, but the combining of technologies to solve problems which will eventually result in a connected world that few have imagined. Over time it will not only transform the insurance industry, but it will also have a profound impact on many aspects of our society, including governments, businesses, and our personal lives.
This is a quickly evolving trend that is in its infancy but has the potential to revolutionize the way insurance carriers and agents interact with their clients. Virtual Reality has been described as the next major computing and communication platform. Augmented Reality has the capability to enable discussions, provide remote access, and create – all in an immersed, realistic virtual environment.
The idea or concept of mass customization is not new. However, with advances in technologies in areas such as digital manufacturing, Big Data and even social media mass customization is going mainstream.
Autonomous Vehicles will significantly impact our personal interactions with vehicles and radically change both personal auto and commercial vehicle insurance. When we consider that vehicle insurance represents 43% of total insurance premiums even slight shifts in premiums will have a profound effect on our industry.
Virtualization (Automation) will impact the insurance industry by allowing agencies, carriers, and clients in other industries to automate certain tasks in order to reduce the resources, including energy, time, and labor, needed to do business.
Blockchain is one of the digital technologies starting to draw attention in the insurance industry, with consortiums like B3i charting use cases and structure. While Blockchain is a distributed ledger most known for its use supporting the Bitcoin digital currency, there are more applications across insurance.
Voice Computing, also known as Conversational Computing, is the next major step in user interfaces. It is now changing the way people interact with and use computers.
3D Printing will become more commonplace as price points reduce for the technology and as other industries embrace its usage. Industries such as Manufacturing and Healthcare are already using 3D printing for prototyping and more. This technology is going to significantly change product design, development and manufacturing as we know it.
Bitcoin and other crypto or virtual currencies have created alternative payment methods and alternative assets. As a purely digital asset, which holds a variable market value, insurance coverage for loss or theft of bitcoins presents an opportunity and a challenge. Some companies are accepting bitcoins for premium payment.
The culture of work is changing and how, when, and where we work is being redefined. New work models are emerging such as work from home and virtual freelance employees. This not only changes the culture of businesses as Baby Boomers need to adjust to a different type of work environment, but it also has additional insurance risks that need to be addressed and mitigated against such as BYOD - Bring your own device, E&O Risk Management and Cyber issues.
In the past 4-5 years the news of data breaches, hacks, ransomware, phishing have been pervasive. The potential impact of data breaches to compromise agency business, as well as the trust of their clients and partners should not be understated. The ACT Changing Nature of Risk work group provides the following as background for strategic discussions.
The textbook definition of telematics is the branch of information technology that deals with the long distance transmission of computerized information. It is a general term that refers to any device that gathers and transmits data in real time. In the insurance industry it has come to mean data about behavior that affects insurance premiums and acceptable level of risk. Telematics can be applied to tracking and diagnostics such as driver behavior, fuel management or maintenance scheduling, but it also includes GPS and navigations systems. Auto policies with premiums based on the telematics data is also referred to as usage-base insurance.
Machine Learning has the ability to impact our distribution channel by providing a new way to communicate with prospects and clients. By supplementing staff with timely, on-demand guidance agencies, carriers, and vendors can improve service levels and drive customers more directly to their needs.
Peer-to-peer (also referred to as ‘P2P’) insurance is new terminology for an old idea. Entities with commonality have been banding together to defray their risks financially for many years. Some of these approaches are known as Risk Retention Groups, Safety Groups and Risk Pools. The major differentiator in these new efforts is the innovative use of new technologies that improve the customer service, product distribution and deliver to reduce costs.
Smart Home technology has the potential of having a significant impact on underwriting, claims, and loss mitigation for property insurance in the near future. These technologies will allow the insurance industry to monitor, in real-time, the health and status of the insurance exposure (homes and buildings being one of the largest combined assets covered by insurance), as well as use analytics for identifying loss potential prior to a loss.
As the number of UAVs and their useful applications increase, the exposures and insurance needs of consumers and businesses will increase. In addition to becoming better educated on the impact drones will have on our industry we must be proactive in developing products that will address consumer (personal and commercial) needs. Further we must create consumer advisories on insurance issues related to drone use.
This is an ever-changing space with little to no regulation - therefore insurance carriers are struggling to create best practices and products in a timely manner, agents are unsure of what questions to ask and are opening themselves up for E&O exposures, consumers are open to risk as they are unaware of exclusions on their policies. Lastly the economy on several scales is being effected – such as rental car companies, hotels, motels, inns and B&Bs.
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