State of Insurance: How Airbnb, Uber and Even Drones Are Complicating the Insurance Business

In this series, professionals debate the state – and future – of their industry. Read all the posts here and write your own (use #MyIndustry in the body of your post). 

We are at the dawn of an era of technology-driven transformation that will make the changes we have experienced over the past twenty-five years seem tame, mild, and slow.

Daniel Burrus – Flash Foresight: See the Invisible to Do the Impossible

The rapid development and adoption of new technology is requiring the insurance industry to adapt and change in ways that are unprecedented. Insurance is a conservative industry. Data is analyzed, exposure to losses are controlled and, ultimately, the cost of insurance is determined based on this information.

In today’s “technology-driven transformation,” the industry can no longer take as much time to sit back and analyze as they have in the past.

Seth Godin put it this way: The question that gets asked about technology, the one that is almost always precisely the wrong question is, “How does this advance help our business?” The correct question is, “How does this advance undermine our business model and require us/enable us to build a new one?”

Changing demographics, new models for the sale and distribution of insurance products, new communication tools, the worry of suffering a data breach — are all issues facing insurance companies, insurance agents, and technology vendors.

Some of the technology developments that have a direct impact on the industry include:

The Trust Economy and Crowd-sharing Services

Uber and Airbnb are the most visible services available. Individuals who drive for Uber and rent out a room on Airbnb are often unaware of the insurance coverage problems they might run into if they had an accident or suffered a loss.

Drones

The use of drones is growing dramatically. Providing proper insurance coverage is a growing need for businesses and individuals. The insurance industry will, increasingly, be a large user of drones for claims investigation. I recently published a more in-depth article on drones, risk management, and insurance. Seattle City Lights recently spent $35,000 removing a drone from high-voltage power lines above a group of houseboats. Is the drone operator liable for that expense?

Wearable Devices

Being able to monitor the actual activity of individuals will begin changing how health and life insurance will be underwritten and priced. In April, John Hancock announced two new life insurance products that incorporate wearable technology (a Fitbit). The Fitbit will monitor policyholders' activities and offer significant discounts on their annual premiums, and policyholders can earn rewards and discounts for any steps they take to improve their health.

Automotive Safety Technology

Cars are getting safer every day. From advanced driver assist systems to data and telematics, your car is becoming a rolling computer. In the not-too-distant future, vehicle to vehicle communication (V2V) and vehicle to infrastructure communication (V2I) will allow your car to communicate with other cars and traffic lights and be able to anticipate slowing down due to traffic ahead. Autonomous cars will be commercially viable much sooner than was anticipated just a few years ago.

Has the insurance industry made any progress?

Yes. Is it enough? Maybe not.

A growing number of insurance companies in the U.S. have announced new insurance coverage options for personal auto insurance for those individuals who decide to drive for Uber or Lyft. The availability of insurance coverages for the commercial and private use of drones is growing rapidly.

Several insurance companies are actively developing new ways to price insurance products using newly developed technology.

Allstate Insurance Company has received a patent (8,996,303) on “a method for mitigating the risks associated with driving by assigning risk values to road segments and using those risk values to select less risky travel routes.” This “road risk score” could be sent to a GPS device and the route re-calculated based on using less risky roads.

ACORD (data standards body) is sponsoring an Insurance Innovation Challenge to highlight innovation within the industry.

The insurance industry is ripe for disruption. Others outside the industry see opportunity where many within only see problems and the reasons why it can’t be done. 

We should not be asking if we should change, but how we can change effectively.

So is the insurance industry going to follow in the footsteps of the music business (think iTunes), the publishing business (think Amazon), the film business (think Kodak), or the entertainment business (think Netflix)? Are insurance agents and carriers going to wake up one day and find that they were not able to adapt fast enough and have allowed others to take the lion's share of the market?

The worldwide insurance industry serves a vital function in society. For hundreds of years, insurance has helped make people whole after suffering a loss.

The unacceptable response is to stick your head in the sand and pretend everything is going to be OK. If you don’t like the current state of the industry, become part of the solution. Create a plan for moving forward. Help begin the process of changing legacy thinking into agile thinking. Look for the opportunities and ways you can help overcome the problems.

Ask how you can make the necessary changes, not if you should. 

What do you think: is the insurance industry making progress fast enough? Where do you see the bright spots that change is happening? Please leave any comments below.

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Steve Anderson is an authority on insurance technology. He is a prolific writer and frequent speaker known for his knack for translating “geek speak” into easily understood concepts. Check out his free weekly newsletter “TechTips” and other resources on his website.