Insurtech — The Thoughts of Matteo Carbone
The role and ability of new technologies to drive change in the very fabric of the insurance industry are both among hot topics of the day. It is hard to see any aspect of the industry that is immune to change; yet the industry has faced supposedly impending disruption before but remained largely untouched. So, we reached out to Matteo Carbone, one of the leading thought leaders on the topic and impact of Insurtech, to give us his take.
Why Matteo Carbone? Well, according to InsurTechNews, Carbone, who hails from Milan, Italy, is the No. 1 industry influencer on the subject. Ten months ago, Carbone left Bain & Company to start the Connected Insurance Observatory, which has a unique mission — to create an industry-based membership think tank to review, discuss and learn about the impact and progress of insurance IoT initiatives. Carbone’s vision is to position the observatory between traditional consulting and research firms. Carbone’s contention is that most insurers are not yet able or willing to invest in untried new technologies and implement new projects. Equally, doing nothing aside from reading the occasional white paper or attending a conference is not a valid plan.
The Observatory’s goal is to offer periodical reviews of what is really happening in the field with insurance IoT, create a strategic vision to exploit the connected insurance potential, and stimulate research and debate. Carbone contends that internal cross-discipline workshops can be a very powerful medium to shape thoughts around innovation, and he personally conducts a lot of workshops with members to discuss, consult and advise on the latest industry developments and trends.
Carbone splits his time between Europe and the United States; he is a firm believer in a cross-country approach, with ideas emanating from different geographies at a different pace based on variable market adoption rates, regulatory constraints and customer acceptance. But Carbone has been in the insurance industry a long time, so he acknowledges the undeniable fact that insurers from every geographic region in the world are sensitive and suspicious of any form of knowledge-sharing, and that they look at collaboration very much as an alien concept.
Despite industry misgivings, Carbone introduced plenary sessions this year with tremendous success — with all the members around the same table — where participants could share experiences in approaching innovation and discuss the potential impact of new technologies or market entrants. At the heart of this unexpected willingness to participate in a ‘club’ is the fact that insurers are pragmatic and understand that no one can afford to be on the wrong side of the outcome.
Carbone cites data collected in partnership with Acord, and a staggering 93% agree that the IoT will have a major impact on the industry; but there was an almost 50-50 split as to whether that would come about through incremental change or be triggered by some paradigm shift. Carbone sees the Observatory’s specialization on IoT usage along the value chain as one of the key values provided to members. This area of specialization came about through consultations with insurers and more than 250 hours of workshops in the first 10 months of 2017.
Carbone argues that the industry needs to quickly mature in its way of looking at the technology impact and potential. Currently, the prevailing thinking about new technologies is that it might offer opportunities to facilitate better cross-selling and add incremental revenue. Carbone sees a much bigger picture and the prospect for entirely new value creation added to the bottom line. Carbone points to telematics to illustrate his point. Telematics is currently positioned in the U.S. as a policy price reducer rather than as a fundamental change in the relationship between insurer and customer. Telematics can and likely will segment the auto insurance risk pool with good drivers more comfortable with data sharing while bad drivers are not. In some markets, the telematics portfolio shows a 20% decrease in claims frequency risk adjusted. But Carbone sees greater value coming from the data acquired that can create and reward customers with a more personalized experience. This can change the entire claims management process and even impact the customer’s driving behavior. In the U.S., just 3.5 million auto insurance customers shared their data with an insurer in 2016, representing 1.4% of the market. In Italy, this figure has already surpassed 20%.
Currently, after 10 months, the Observatory has 35 members in Europe and 15 in the United States, including American Family, Munich Re, NAIC, Nationwide and Travelers.