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The era of IoT and reinventing the insurance industry, by Synechron’s David Horton

Today the technologies of science fiction from Knight Rider are fast becoming mainstream, and the insurance industry is faced with a glut of new issues and challenges

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If your car has a self-parking feature, have you considered whose fault it would be if the car knocked over a child whilst parking?

In the future driverless cars may well be a shared asset amongst a number of people

The era of IoT and reinventing the insurance industry, by Synechron’s David Horton

For those of you that can remember the 80s TV series Knight Rider, it was about a guy and his self-driving car, which had an Artificial Intelligence called KITT and some cool secret agent-like gadgets (for you millennials….think Google Car with Amazon Alexa built by James Bond’s Q).

 

The hero of the show, Michael Knight could connect and talk with the car via his smartwatch and give KITT some instructions on how to stop the bad guys – though from time to time the car would disagree with him and do what it felt was statistically better.

 

Today the technologies of science fiction from Knight Rider are fast becoming mainstream, and the insurance industry is faced with a glut of new issues and challenges caused by the ever evolving world of connected devices, artificial intelligence, and autonomous technology.

 

Consider a scenario where KITT makes a decision and causes a car accident that results in an insurance claim. Who is liable? Is it Michael Knight, the car’s regular driver/passenger, is it ‘Knight Industries’ who owns the car, or is it the programmer who developed the car’s AI?

 

Today, if your car has a self-parking feature, have you considered whose fault it would be if the car knocked over a child whilst parking, or scratched another car whilst performing the maneuver? This is but one of the challenges facing insurers today, and in the last week we have seen the UK’s first personal driverless car insurance policy launched by motor vehicle insurance firm, Adrian Flux.

 

If analysing the risk associated with the above scenario wasn’t complex enough, consider that in the future driverless cars may well be a shared asset amongst a number of people.

 

According to best-selling futurist Brett King in his latest book Augmented it is likely that driverless cars could be part-owned by a number of people who use the car when they need to, but then expect it to earn an income throughout the day via some Uber-like job responsibilities.

 

The car is likely to have a mobile wallet of its own and could in all likelihood fund its own refueling, maintenance and insurance premiums through the revenue it earns during ‘work’ time. If the car was to have an accident, the question of liability could be somewhat more difficult to answer.

 

The crowd sourced liability coverage of all the owners is one possible answer, but as with all technology driven debates, it gets more complex when you have to consider who is responsible for such things as the car’s software updates, security patches, firewall rules, Operating System management, GPS navigation coverage or if the car has been hacked.

 

The reality is that the insurance industry has already started anticipating this new connected world we will live in and many insurers already provide discounts for cars fitted with assistive technology such as ABS which is proven to reduce the risk of accidents.

 

Just as is the case with new Fintechs, the InsurTech startup space is attracting a huge amount of investment from the likes of big insurers such as American Family, Aviva, AXA and Generali and even the non-insurance tech goliaths such as Google, Bain and Kholsa, who see a bright future for many fledgling IoT firms working on insurance solutions.

 

In the past 12 months we have seen a spike in the number of IoT products and services that address homes and buildings as well as health and fitness applications, and with advances in technologies like sensors and wearables, there are new digital opportunities throughout the insurance value chain. Most notably there is many new digital health insurance products emerging from the likes of programs like John Hancock’s FitBit solution that leverages the data to help policyholders adjust their premiums by adopting healthy habits.

 

Elsewhere we are also seeing firms discounting home insurance when the occupants use a Nest smart device in their home as it is able to detect smoke and CO levels reliably. One insurance firm, Renaissance Dental even launched an insurance product through a partnership with the manufacturer of the Beam smart toothbrush.

 

Apple recently hypothesised that in the near future they will be able to reliably prevent a heart attack by proactively monitoring the health of your heart beat patterns, and alerting you and your doctor when recognizable anomalies occur.

 

The domino effect of such advances is that people are likely to live longer and healthier, and life expectancy (and life insurance!) is likely to take on new risk attributes never before considered.

 

Insurance as we know it today will take on new meaning, but if traditional insurers are to remain relevant in the future, they will need to start engaging with specialist technology firms that have the insight and know-how to exploit the opportunities of ‘what’s next.

 

What the industry needs to remember too, is that new insurance products are going to need new processes, so it will be important to ensure that new functionality is not just bolted on to an old system.

 

 

 

David Horton is a thought leader and advisor in the retail banking innovation space. As head of Innovation at Synechron, Middle East, his team works towards advising and helping banks with innovative and creative, digital transformation.

 

With insight and practical experience of the latest Fintech trends and disruptive technologies in the retail banking industry, David is able to help banks with idea generation and more importantly, the execution of these ideas. He has additional perspective driving digital marketing and technology efforts from years of working in the banking, consulting and technology industries, and is one of the few individuals who is able to ’talk’ techie and business language at the same time.

 

David frequently writes and speaks about Fintech topics, and can be seen at several key industry conferences in the financial and payments space.

 

 

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