So the world is changing at bewildering speed and we are facing an economic and digital revolution. To manage that change, countries and communities need to change the way we do business and insurance industry cannot ignore these changes. Learn why.

1. MateuszMaj
mat@motosmarty.com
Innovation in Insurance
necessity or luxury ?
VUB,06/05/2016

2. Entrepreneur, Actuary, PhD
with passion for innovation
Studies:
- Master in Mathematics and Master in Statistics –
CSWU Warsaw & KULeuven
- PhD in Applied Economics at VUB,
PhD in Applied Mathematics at ULB supervised by prof.Vanduffel
Career:
- Actuary with 7+ years of experience in financial industry
- Entrepreneur – disrupting insurance industry
- Activist – Chairman of IABE Big Data WG

3. Insurance is the main way for businesses and individuals to reduce
the financial impact of a risk occurring.
Insurance companies sell protection against risk and cultivate risk-
averse culture that reduces incentives to take additional risks and
innovate.
What is insurance?

4. What is innovation?
Innovation is the development of new ideas and their economic
applications as new products or processes.
An innovation increases profits:
- on the value side (creates additional value for which customers
pay more)
- on the cost side (more efficient production)
What is innovation?

5. What is innovation?
Product (iPhone, pampers, credit default swaps, … )
Process (lean manufacturing, …)
Service (Mobile Vikings, Uber, ZipCar, Airbnb, …)
Business model (SaaS, Apple, …)
Value (Kinepolis megaplex model, …)
Market (Mobile Vikings, McDonald, ...)
Type of innovations

6. What is innovation?
The right environment
- Give people the space to think and grow. They need time to read, reflect and share
ideas with others
- Make sure that mechanisms exist which allow both organizational and peer
recognition for excellence
- Help, guide and empower people by removing any real or perceived barriers
- Take personal risks, because in large and bureaucratic organizations it is often more
productive to ask forgiveness than permission
Innovation = risk

7. Insurance & Innovation
interplay

8. What is Big Data?

9. Internet of Things

10. What is Big Data?

11. What is Big Data?

12. What is innovation?
Insurance has often acted as a spur for innovation, but the industry
itself has been rather sheltered from disruptive forces.
True? Insurance has a tremendous track record of innovation,
including for instance mortality tables developed by British 18th
century mathematician dr. Richard Price.
Is insurance sector ready to innovate?

13. Lloyd's is the world's specialist insurance market. Unlike many other
insurance brands, Lloyd's is not a company; it's a market where
members join together to insure risks.
Lloyd’s has a tremendous track record in insurance product
innovation including the first Earthquake cover, the first cover for
cars and planes and the first satellite cover.
Lloyd’s

14. What is innovation?
India has 800 million people who carry a cell phone.
In Africa, there are an estimated 735 million mobile phones.
In India and Africa insurers managed to transform its business to mobile phone
based, simplify it and dramatically increase the availability of insurance.
Interestingly, in the US with widespread internet access and ubiquitous apps,
insurers are still figuring out how to best benefit from digital technology.
Digital technology

15. Big data is a term for data sets that are so large or complex that
traditional data processing applications are inadequate. (Wikipedia)
It can replace underwriting expertise when it comes to less complex
risks like in case of:
- car insurance: 20% of the UK motor market is written online based on pre-
programmed rules. With advent of self-driving car it might dissaper
- natural catastrophe insurance: the complex wind models combined with
granular property data make the underwriter obsolete.
Big Data

16. What is Big Data?Big Data
Eric Schmidt,
CEO of Google, 2011
“There
was
5
exabytes
of
informa4on
created
between
the
dawn
of
civiliza4on
through
2003,
but
that
much
informa4on
is
now
created
every
2
days,
and
the
pace
is
increasing.”
But
not
only
the
size
ma0ers
!!!

17. Not only size matters
Volume
dataatrest
Terabytesofexisting
datatoprocess
Velocity
datainmotion
Streamingdata
milesecondstorespond
Variety
datainmanyforms
Structured,unstructured,
differentsources
Veracity
dataindoubt
Uncertaintydueto
dataincompleteness,
ambiguity,
modelapprox.,etc

18. Car insurance & telematics

19. Car insurance pricing

20. Car insurance pricing
Ratingtrends
1980s Now
Profession
Engine power
Coverage
Bonus-malus
Coverage
Bonus-malus
Claims history
Traffic violation
history
Age of vehicle
Use of vehicle
Make of vehicle
Purchase price
Parking place
Occupation
No. of drivers
Age of drivers
Maritial status
Real estate
Driving license
Mileage
Registered owner
Credit rating
…
Do we need additional factors? Is telematics necessary?

21. Univariate
basis
Risk
modelling
Technical
premium
modelling
Scenario
testing
Price
optimisation
Extra data
sources
Telematics
data?
Car insurance pricing
Ratingtrends

22. UBI is the scheme where insurance premiums are
calculated based on dynamic causal data, including
actual usage and riskier driving behavior.
Car insurance pricing
Usage-BasedInsurance

23. • New rating factors allowing flexible, dynamic and robust risk
pricing;
• Improved claims processes and claims ratio
• Better, personalized insurance offer and value added
services;
• Escape treadmill of commoditization and discount pricing.
Car insurance pricing
Usage-BasedInsurancebenefits

24. Car Insurance
Tescogroup–UK
Motor – 1M
Pet – 0.45M
Travel - 0.175M
Life – 0.175M
Home – 0.4M

25. • Insurance prevention program with discounts and rewards for good
driving
• ‘Phased’ approach:
• Phase 1: combine data from different sources i.e. traditional channels, online channels,
external service providers, Tesco group warehouses;
• Phase 2: Identify the right customers within Tesco network;
• Phase 3: Provide initial offer and reward drivers with initial rewards from Tesco group;
• Phase 4: Iterate and provide personalized insurance offers.
Car Insurance
makinginsurancesexy

26. Car Insurance
examples
Full
UBI
–
niche
market
segments
Motor
insurance
telema;cs
–
mass
market
Works
well
with
niche
segments:
• Young
drivers
• People
living
in
risky
regions
• Low-­‐mileage
drivers
Insure
the
Box,
UK
New
disrup=ve
model
for
low-­‐mileage
drivers
with
prepaid
miles
(similar
to
prepaid
mobile.
No
punishment
for
bad
driving.
Self-­‐selec=on
+
individualized
premiums.
Progressive,
US
“Prince
of
pricing”
with
MyRate
(pricing
variable
innova=on)
&
Snapshot
(1st
telema=cs-­‐based
insurance)
offers
Self
selec=on
&
individualized
insurance
premiums
Intesa
SanPaulo
Assicura,
IT
Telema=cs
play
key
posi=on
–
car,
bike
home
Created
viable
risk-­‐based
pricing
model
with
phased
approach
for
Viaggia
con
me:
Phase
1
(tradi=onal
variables),
Phase
2
(Banking
parameters),
Phase
3
(Purchase
and
use
variables),
Phase
4
(Behaviour
variables)

27. Car Insurance
initiativesinBelgium
P&V Go Box AXA driveXperience Ethias Young Drivers
Corona Caro app

28. In partnership with:

32. The platform
1. Analytics
SMART ANALYTICS
DDP works one on one with the driver by harvesting
driving style data and driving risk information, and
generating private, personalized feedback.
CONTEXTUALIZED SCORING
Private, driver-controlled data on daily driving
habits.
It’s based on driving behavior, car use, road safety
and distraction with driving dynamics patterns.
Insurance risk index takes into account driving
exposure and context that is translated into a single
index that reflects accident probability and can be
used by insurance companies, leasing, fleets and
road safety organizations.

33. The platform
2. Feedback
IT’S PERSONAL
Private & personalized feedback to immediately
improve driving.
Like a personal driving coach.
IT’S EFFICIENT
It addresses any target group. Drivers get smart
incentives, and world-class engagement tools to
become better drivers.
IT’S FUN
Game design elements including challenges, badges
and points to teach, engage and motivate drivers.
A friendly competition to stimulate drivers to reach
their goals, engage them in a fun way, and improve
their experience.

34. The platform
3. Community
DDP is the best way people experience full-on
engagement and collectively improve road safety …
... IN PRIVATE LIFE
Connect with friends.
Share personal driving experience.
Benefit from the community.
... AT WORK
Young employees can work & socialize at the same
time.
Encourage employees engagement through social
connections.

35. The platform
4. Rewards
SAFE DRIVING = BENEFITS
Unlock the value of the new safer driving habits.
NO MATTER WHICH BUSINESSES
Receive benefits and get personalized offers from
services available inside & outside the automotive
ecosystem.
LOYALTY PLATFORM
Receive community driven marketing campaign.
Start a long-term interaction based on values and
loyalty.

37. MateuszMaj
mat@motosmarty.com
Q&A