Protection providers will soon be considering customer telematics. Phil Jeynes examines the consequences.
Extreme weather at the start of 2014 certainly dominated the press and the insurance industry featured heavily, as our response to the crisis came under scrutiny.
Of course, it has not only been the UK which has been suffering the effects of climate change and other countries' insurers have been similarly under the proverbial microscope.
In South Africa, for example, the residents have been subjected to a spate of unusually severe hailstorms, with stones as large as golf balls causing damage to properties and causing chaos on the roads.
Interestingly, this unexpected, random act of nature has allowed one insurer, Discovery, to produce data which shows that not all drivers suffered the effects of the weather equally. In fact, they proved that better drivers were less likely to have suffered storm damage and therefore had not needed to make a claim.
These findings were published in the insurer's interim results, which focussed on the latest innovation, an initiative which uses on board telematics to track not only a car's location, but also its speed, cornering ferocity, braking technique and overall driving style.
This advanced "black box" technology, means Discovery can attract a better class of driver in the first place (new customers are 56% less likely to have had a claim in the last three years than those of their competitors), reward better motorists (discounts of up to 50% on fuel through their partner, BP) and price with a greater degree of accuracy in future, leading to far lower than standard lapse rates in what is a hugely competitive market.
All of this leads to a higher degree of engagement between insurer and customer, the unexpected by-product of which was the ability to pre-warn drivers who were in regions about to be hit by the mega hail, thus allowing them to avoid the carnage on the roads. Everybody wins.
Telematics has now taken root in the UK too, with some insurers beginning to offer the service and promising better premiums for those with good statistics (and higher prices for those with a lead foot…).
So what can those of us in the Health and Protection sector learn from these developments?
Presently, PruProtect is the only provider in the Protection market which rewards customers for healthier living after the point of purchase.
Its policyholders can get cheaper premiums, annual cashback and other benefits by engaging in a variety of ways, trackable via technology such as wearable pedometers, links with gym entry systems, heart rate monitors and smartphone applications which record activity such as walking, jogging, cycling and so on.
Members are also encouraged to have regular health screenings; from basic "MOTs" which check blood pressure, body mass index, smoker status, glucose and cholesterol levels to full medical assessments. Again, rewards are given for healthier readings.
Currently, Vitality is used as a carrot to encourage improved behaviours among customers. No stick is involved for those who either do not wish to engage or whose health deteriorates over time, other the fact that will not receive the lower premiums and money back that those engaging enjoy.
While participation in such schemes is extremely simple, the onus remains on the customer to interact. But the next step may well be a system of monitoring a person's ongoing health even without their engagement, just like telematics is doing for car drivers.
The technology necessary for such a leap forward is beginning to take shape, with nanotechnology already a reality.
Nanomedicine
In an interview with Future Medicine magazine, Frank Boehm, CEO of NanoApps Medical Inc., and author of "Nanomedical Device and Systems Design: Challenges, Possibilities, Visions" said: "One of the most significant and important facets of nanotechnology is likely to be its application to medicine, or what is called nanomedicine. There is a powerful and rapidly increasing trend, with global reach, toward the development of more compact, minimally invasive, smarter, more precise, and efficacious medical technologies.
"Nanomedical diagnostics and therapeutics operate at cellular and molecular levels, precisely where many disease processes find their genesis, and from which they emanate. Hence, nanomedicine has the potential for diagnosing and treating many conditions preemptively, before they have the opportunity to proliferate.
"Since sophisticated nanomedical devices and systems will be designed and engineered to operate within cellular, organellar, molecular and (hypothetically) atomic domains, it is conceivable that they will be imbued with capacities for the highly accurate diagnoses and meticulous and thorough eradication of virtually any disease state, pathogenic or toxic threat."
It sounds a bit science fiction at the moment and, as with all new areas of science and technology, cost will make such applications prohibitive at least in the
short term.
However, one can foresee a time when tracking a client's health is a real time process and, just like the hail storms in South Africa, we can warn customers about potential risks even before they become manifest.
