Is the Unexamined Life a Pipe Dream?

Over dinner this evening in advance of the Keefe, Bruyette & Woods Insurance Roundtable Thursday in Chicago the conversation turned to Amazon’s Echo, Google’s Nest and devices like Automatic (for vehicle tracking) and health monitoring apps on smartphones and smartwatches. It seems that the unexamined life is rapidly becoming a thing of the past.

The sense among the insurers, application developers, and investors seated at the dinner table was that this increasingly ubiquitous data gathering culture of smartphones and personal assistants is outrunning the insurance industry’s ability to cope and capitalize.

At stake is a world of home, auto, health and life insurance being disrupted by the emerging Internet of Things culture. In the world of IoT, data is shared in exchange for valuable or discounted services. Insurers don’t quite know whether to drool or flee.

What is clear to all is that the insurance industry knows what to do with data, but not how to collect it; while technology companies know how to collect data, but not what to do with it. Insurers are petrified of alienating the very customers they hope to better serve with enhanced analytics. Too much prying may undermine rather than reinforce customer retention. Not enough prying will leave multibillion-dollar portfolios exposed to undue risk.

Adverse selection is the dreaded equalizer. The insurer that fails to gather enough data or the right data may end up with all the worst risks in the pool!  To say nothing of potentially infringing a protected class such as gender or race.

The enablers of this brave new experience are technology companies such as Apple, Amazon and Google. These companies are wrestling with their own customer trust issues and data demons.  And they are unaccustomed to the regulatory environment governing insurance.

The consensus opinion at the table was that Google cannot be trusted. Its data acumen is outweighed by its hubris, rendering it incapable of recognizing and accepting astute guidance. And Google’s privacy track record is pocked and cratered with violations.

Google is moving from smartphones to in-home media consumption (Chromecast) to home control (Nest) to driving behavior tracking (Waze). And Google has launched a car insurance comparison site in the United Kingdom and the U.S. clearly exhibiting its overt interest in the insurance industry.

The opportunity for Google to tie all of these data elements together into a comprehensive whole exists but is likely to elude Google without the help of strategic partners. But Google is a lousy business partner with a reputation for bullying. Google is capable of succeeding in spite of itself, but the company has as many critics (more?) as fans.

Apple has a comprehensive headlock on its customers, but one in which the Apple customer willingly participates. Apple’s warm and fuzzy bond with its customers has set the stage for the company to eventually explore insurance or at least facilitate the insurance work of partners.

It remains to be seen whether Apple will approach insurance in the same disruptive manner that it approached the music industry. Consensus opinion is that Apple’s brand equity is the envy of the insurance industry – and potential partners are lining up to do business.

Amazon, too, represents an intriguing player. Like Apple, Amazon has topnotch brand equity and logistical acumen. Both Apple and Amazon understand e-commerce, but Amazon probably takes the cake in fulfillment. Both Apple and Amazon surpass Google in execution and customer relationship management.

Amazon, like Apple, is deeply embedded in the digital lives of its customers thanks to Amazon Prime. The new Echo personal assistant opens new doors as well, literally. While Google and Apple have offerings that bridge home, car and work, though, Amazon lacks an offering to connect the car and round out the customer profile.

Google has made the most progress taking on the insurance industry but is arguably the most poorly equipped to capitalize on the opportunity. Amazon and Apple may require more time to prepare their attack, but their stronger customer relationships and advanced systems will ultimately have a role to play in the IoT-infused insurance environment currently unfolding.

New partnerships between the technology industry and the insurance industry are opening doors to new insurance products – just as new services such as Airbnb and Uber are driving demand for new insurance solutions. Just as electric vehicle technology has opened the door to new market entrants like Tesla in the automotive industry, smartphones and other connected devices are opening the insurance industry to new participants like aggregator Coverhound and app developers like Automatic, DriveFactor, Driveway – among many others.

With a little luck new solutions will mean lower premiums, better service, and a far more pleasing insurance purchasing experience than what exists today. And if insurance is more pleasing and easier to purchase, maybe people will buy more of it.