“Innovations in Insurance” is a Q&A Enservio blog that interviews thought leaders working to improve the quality of work while managing change within their organizations.
At the Property Innovation Summit, Enservio Labs was announced as an independent kind of ‘think tank’ or incubator, allowed to imagine possibilities for developing new products. Anything you can share on that front?
Enservio Labs is in its third year of operations. An early product to come out of Enservio Labs was ContentsITV, the industry’s first analytics product that predicts the value of contents in a household. Soon we’ll be taking the wraps off a fraud detection product unlike anything else on the market today. We’re also working with key partners on a couple of exciting new initiatives in the areas of mobile and underwriting analytics.
Privacy concerns are top of mind when it comes to programmable, smart home devices like Google Nest, which is potentially hackable. Will insurance-related apps be compelling enough to override this concern?
At this stage, it’s difficult to say how regulators will perceive this new data; what they will allow to be included in the Underwriting process is a great unknown. Two past examples of different regulatory reactions to innovation are quite instructive. Years ago, credit scores were found to be highly predictive of an insured’s likelihood to have a claim. Early adopters like Progressive and Geico used this insight to completely disrupt auto insurance. For political reasons, state regulators, as in California, are increasingly limiting or not allowing credit scores to be used because they are being viewed as potentially discriminatory.
Another example is the advent of telematics (e.g., devices in cars that collect data on driving habits). Progressive has lead the way again on this and other carriers are catching up. Like credit scores, it means better consumer data yields a better rate. We are still in the early stages but I suspect this will continue to be an “opt-in” program where good drivers are happy to get the device installed with a resulting premium discount. However, I think the majority of policyholders will opt-out, especially if they believe it will increase their premiums. People are smart enough to know the basic behaviors that drive premium rates and will act accordingly. A substantial part of this group will probably feel too uncomfortable with the surveillance aspect of telematics and the privacy issue it raises.
The Internet of Things promises to text homeowners immediate alerts of any water heater leaks, gas line ruptures, frozen pipes, or fire. What are other possibilities for smart homes that pertain to the contents side of property insurance?
Automatic alerts about the status of your house in terms of fire, freezing, or unauthorized entry, are all good uses of smart devices and the market is proving these popular as the first wave of Internet of Things applications. Companies like ADT have long been providing these types of services at a much higher cost, so this may disrupt their business. In terms of contents, one area might be to leverage the increasing use of RFID tags embedded in electronic products to alert homeowners on warranties, obsolescence, product failure or recalls. Maybe these tags can tell you what the resale value of the item may be on Craig’s List or eBay. We’re in the very early stages, so the sky’s the limit. Innovation never sleeps.