NEW YORK: Twice a day, Scott Ozawa’s Bluetooth-enabled toothbrush tells his dental insurer if he brushed for a full two minutes. In return, the 41-year-old software engineer gets free brush heads and the employer which bought his insurance gets premium discounts.
The scheme, devised by Beam Technologies Inc, is just one of the latest uses of technology by insurers hungry for more real-time information on their customers that they say lets them assess risk more accurately and set rates accordingly.
In theory, everybody wins, as policyholders adopt better habits and insurance companies save money on claims.
However, there are concerns that insurers will eventually use the data they get to cherry-pick the best and most profitable customers, while hiking rates or even denying coverage to people who choose not to participate.
Tech leap
Beam’s technology follows auto insurers using devices in cars to find out how far and how safely policyholders drive — known as telematics — and life and health insurers giving customers wearable devices such as Fitbit and Apple Watch to keep track of their activity.
US insurers and their customers have generally been slow to adopt new monitoring techniques, which have been common in auto insurance in South Africa, Italy, Brazil and Britain for years.
But the world’s biggest insurance market, with $1.3 trillion in premiums in 2015 — more than a quarter of the global total — is catching up.
Mayfield, Ohio-based Progressive Corp, an early leader in the area, said its telematics-based “Snapshot” auto policy allows it to “attract, identify and reward good drivers while also retaining those customers longer.” Progressive has more than 2 million Snapshot policies in force, about a fifth of its total US auto business.
About 30 percent of North American auto insurers now have telematics programs, according to a survey last year by insurance consultants Strategy Meets Action (SMA). That will rise to 70 percent by 2020, SMA said.
Competitive advantage
Insurers generally do not disclose data on premiums or profit on specific types of policies, so it is hard to tell what effect such approaches have had on their bottom lines, or whether riskier customers are being asked to pay more.
However, people in the industry agree that increased data from technology means insurers can target more desirable customers.
The benefit for insurers is “competitive advantage, pure and simple,” said Katie DeGraaf, a senior consultant at insurance advisory firm Willis Towers Watson, in a recent report. “Companies that have integrated granular telematics data into rating plans are better positioned to attract and retain the most profitable customers.”
Much of the pioneering work in the area has taken place in South Africa, which suffers chronic high crime and accident rates.
Johannesburg-based financial services firm Discovery Ltd., whose car insurance unit has been tracking customers’ driving and using the information in pricing since 2011, said it has seen a 10 percent drop in accident claims since then.
Fundamental change
Insurers interviewed by Reuters said better data collection allows them to underwrite risk better, and customers tend to take better care of themselves when confronted with numbers.
They described participation in data-tracking programs as voluntary, and said they are transparent about what information they collect and confident about data security.
Some of that might be changing, however. Root Insurance Co, a Columbus, Ohio-based startup, immediately uses the information it gathers and only insures what it believes are good drivers.
Root’s smartphone app tracks car movements for two weeks before offering eligible customers a quote, according to CEO Alexander Timm. An algorithm assesses risk using factors such as tailgating, fast turns and texting.
Using data to segment risks in such a way is only set to spread.
“Pricing will change,” said Anand Rao, a principal at consultancy PwC who focuses on analytics and uses of artificial intelligence in business. “Not everyone will change their behavior, which will start translating into different pricing and different types of products.”
The scheme, devised by Beam Technologies Inc, is just one of the latest uses of technology by insurers hungry for more real-time information on their customers that they say lets them assess risk more accurately and set rates accordingly.
In theory, everybody wins, as policyholders adopt better habits and insurance companies save money on claims.
However, there are concerns that insurers will eventually use the data they get to cherry-pick the best and most profitable customers, while hiking rates or even denying coverage to people who choose not to participate.
Tech leap
Beam’s technology follows auto insurers using devices in cars to find out how far and how safely policyholders drive — known as telematics — and life and health insurers giving customers wearable devices such as Fitbit and Apple Watch to keep track of their activity.
US insurers and their customers have generally been slow to adopt new monitoring techniques, which have been common in auto insurance in South Africa, Italy, Brazil and Britain for years.
But the world’s biggest insurance market, with $1.3 trillion in premiums in 2015 — more than a quarter of the global total — is catching up.
Mayfield, Ohio-based Progressive Corp, an early leader in the area, said its telematics-based “Snapshot” auto policy allows it to “attract, identify and reward good drivers while also retaining those customers longer.” Progressive has more than 2 million Snapshot policies in force, about a fifth of its total US auto business.
About 30 percent of North American auto insurers now have telematics programs, according to a survey last year by insurance consultants Strategy Meets Action (SMA). That will rise to 70 percent by 2020, SMA said.
Competitive advantage
Insurers generally do not disclose data on premiums or profit on specific types of policies, so it is hard to tell what effect such approaches have had on their bottom lines, or whether riskier customers are being asked to pay more.
However, people in the industry agree that increased data from technology means insurers can target more desirable customers.
The benefit for insurers is “competitive advantage, pure and simple,” said Katie DeGraaf, a senior consultant at insurance advisory firm Willis Towers Watson, in a recent report. “Companies that have integrated granular telematics data into rating plans are better positioned to attract and retain the most profitable customers.”
Much of the pioneering work in the area has taken place in South Africa, which suffers chronic high crime and accident rates.
Johannesburg-based financial services firm Discovery Ltd., whose car insurance unit has been tracking customers’ driving and using the information in pricing since 2011, said it has seen a 10 percent drop in accident claims since then.
Fundamental change
Insurers interviewed by Reuters said better data collection allows them to underwrite risk better, and customers tend to take better care of themselves when confronted with numbers.
They described participation in data-tracking programs as voluntary, and said they are transparent about what information they collect and confident about data security.
Some of that might be changing, however. Root Insurance Co, a Columbus, Ohio-based startup, immediately uses the information it gathers and only insures what it believes are good drivers.
Root’s smartphone app tracks car movements for two weeks before offering eligible customers a quote, according to CEO Alexander Timm. An algorithm assesses risk using factors such as tailgating, fast turns and texting.
Using data to segment risks in such a way is only set to spread.
“Pricing will change,” said Anand Rao, a principal at consultancy PwC who focuses on analytics and uses of artificial intelligence in business. “Not everyone will change their behavior, which will start translating into different pricing and different types of products.”
