Insurance as a Service?

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Flying off cliff

“Living at risk is jumping off a cliff and building your wings on the way down.” — Ray Bradbury

Imagine a world where your insurance benefits and rates fluctuate on a daily or even hourly basis, based on your unique lifestyle. Sure, you have a baseline of auto and homeowner’s insurance that protects your “stuff”. But, in addition to that, your rates fluctuate based on your behaviors and movements. In other words, your insurer insures “you being you”. In this world, an insurance company has become your personal risk manager. Here are some situations where this would be quite useful:

  • Your job requires a lot of travel. One week, you are on a plane to New York. The next month, you head to Brazil. Automatically, travel insurance is added tailored for each trip. Not just to reimburse your airfare but tailored to your personal risk in each location.
  • Your son turns 16. An umbrella policy kicks in to cover any unfortunate driving mishaps that may point to you as “deep pockets”.
  • You quit smoking and slim down. You begin exercising regularly. In tandem, your blood pressure and cholesterol levels plummet to triathlete levels. It actually looks like you may live forever.
  • You buy a motorcycle. You ride your bike across the US to raise money for charity. In a fundraising frenzy, you break the Guinness World record for number of buses jumped while riding a motorcycle.

I don’t know about you. But, I’d love to have a personal risk manager automatically step in and cover me for any risks I’m taking – particularly if I’m not aware of them. The beauty of this is that I get better coverage, tailored for my lifestyle. What’s more – as my personal advisor, my insurance company can get out of the commodity price game.

Think of this as “pay how you drive” on steroids. For those of you unfamiliar with “pay how you drive (PHYD)” insurance policies, my auto insurance rates are determined according to when I drive, how often I drive, where I drive, how fast I drive, and how often I have to brake too fast.

So, insurance as a service becomes about what I do, when I do it, and how often I do it, including its potential effects on my financial or physical health. Furthermore, it can also be about the risk others in my family may be taking that could negatively impact our combined household financial health.

What will it take for an insurer to provide “insurance as a service”? To get in the game, insurance providers need to start laying the foundation with:

  • Customer Analytics – Use advanced analytics to develop psychographic profiles that better target products and related marketing messages and methods of interaction with customers
  • Real-time Personalization — Capitalize on new technologies (such as social and mobile) to gather personalized data within each customer’s context and to use this information to form more personalized relationships in real-time
  • Contextual Tools – Integrate social and mobile technologies with content and analytics to help anticipate customer needs, develop products that exceed them, and build brand loyalty

There is no doubt that the age of the empowered consumer is changing the relationship between insurer and policyholder for the better. To be sure, insurers will continue to positively impact customers’ lives by mitigating their financial risks. But, insurers can also evolve into comprehensive personal risk managers for their policyholders, improving their customers’ health and welfare as well.

There’s no time to wait! Insurers should begin offering situation-dependent personal risk management products today. Here’s a suggestion to start insurers down the path of this brave new fluctuating risk management world. Let’s say you don’t have comprehensive auto insurance. Wouldn’t it be nice if your auto insurer began to automatically provide theft insurance whenever your car enters a high-risk auto theft area? Yes, forging new relationships with your policyholders is as easy as that.

For more food for thought, insurers can check out IBM Smarter Insurance, IBM Smarter Commerce and “Digital Reinvention: Trust, transparency and technology in the insurance world of tomorrow.”

Global Cloud Leader, IBM Institute for Business Value

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