Holborn recently presented at Finger Lakes Insurance Council’s (FLIC) Underwriting Roundtable on the topic of “The Future of Everything.” During the discussion, the team discussed recent trends in consumer behavior and distilled the recent smart technology trends in both the auto and homeowners the market, while examining the impact on the insurance industry.
Ownership to Services
It’s no secret that brands long-loved for reliability, stability and tangible goods have given way to digital technology, information management and social connection.
Millennials, the largest generation in US history, are just entering their peak spending years. With the ownership of cars and homes seen as burdensome, a new wave of customer buying patterns and needs emerge as well as new and evolving risks.
Technology’s Effect on Auto
The auto insurance market is expected to shrink over the next 20 – 30 years. With advanced safety features becoming more and more standard on new cars, annual loss costs are expected to reduce from $125Bn in 2015 to $50Bn in 2040. These technological improvements, coupled with reliance on on-demand car service and the impending rise of autonomous vehicles, will affect the pricing, underwriting and loss experience for auto. Despite the eventual expected reduction in frequency, the severity per accident is likely to rise with more expensive cars and parts to replace.
The Smart Home
From adjusting the temperature of your home remotely to security systems and water monitoring devices, home ownership is embracing the tech age and is no longer just “bricks and sticks.” The implementation of these devices may have real effect on loss mitigation, risk selection, and subsequently rates. However, like auto, damage is costlier to repair and replace. While consumers remain skeptical on the use of the data gathered, potential new risks will emerge including possible cyber hacking and product liability exposure. An area to monitor.
Emerging Insurance Industry and Response
Insurers at the forefront of the technology developments will have access to vast amounts of “big data.” The challenge becomes analyzing trends and effectively using it to make strategic decisions. Peer to peer insurers (Lemonade) and quote aggregators (compare.com) have begun this work for standard lines, such as auto and home, as well as small commercial.
What are insurers doing to stay ahead of the curve?
Despite great technological achievements, the importance of customer service remains. At Holborn, we seek to combine business solutions with the changing world of data and analytics, all backed by an understanding each clients’ strategic goals and experience.