Around the world insurance companies are turning to innovative solutions to help customers reduce their risk profiles. This should, in turn, help reduce premiums. But Ireland needs to catch up.
"Ireland is behind the curve when it comes to innovation in insurance," says Naoise Harnett, insurance partner at law firm Pinsent Masons.
While some innovation is in evident here, most are “about strengthening existing products and services to strengthen customer relationships, rather than the rollout of new business models based on technological innovation,” he says.
In the Irish motor insurance market, for example, telematics, a means of monitoring vehicles that combines location technology with onboard diagnostics, is offered to younger drivers but isn’t generally available.
“And we are not aware of there being any reduction in premium for motor policies in the Irish market for other safety systems like autonomous emergency braking,” he says.
Rolled out
“There is also no insurer offering motor insurance in the Irish domestic market that can be switched on and off. This product has been rolled out in a number of other jurisdictions for persons who do not use a car full time. Pact Insurance in the USA is a notable example of an insurance company offering this cover. The perception is that Irish insurers are not keen to introduce this product as it could result in less revenue generation during periods when policyholders do not require cover.”
There are a number of smart home options which are offered as optional add-ons to home insurance cover in the Irish market, he says. “Those options may result in lower home insurance premiums but this is not guaranteed. We are not aware of there being a single product which provides smart home features with lower home insurance premiums on offer in the Irish market. There is also no equivalent in the Irish market to the Lemonade business model which underwrites home insurance and settles claims online in minutes through the use of machine learning technology,” he says, referring to the US home insurer which recently entered the German market.
In life and health, Irish Life recently introduced two innovations, he points out. "The first is its MyLife health and wellness app which is powered by Dacadoo, a Swiss company operating a mobile-first digital health engagement platform considered to be a leading company in this area," says Harnett.
"Irish Life also recently launched a wellness DNA test in partnership with Prenetics, an Asian genetic testing and digital health services company backed by Ping An and Alibaba. Prenetics is available on a white label basis which accelerates speed to market and generally, minimises implementation costs. Other relevant developments in this sector in Ireland include Zurich Life offering Garmin Vivosmart wearable devices with their products. Laya have also rolled out their network of clinic services with free treatment within prescribed thresholds for members."
Parametric insurance is a type of insurance that does not indemnify the pure loss. Rather, it agrees from the outset of the contract to make a defined payment upon the occurrence of a triggering event, he explains.
“The trigger event is often a catastrophic natural event which may ordinarily result in a loss or series of losses. The trigger event is typically based on parameters directly related to the risk that the protection buyer seeks to acquire coverage against, such as hurricane wind speed, hurricane minimum central pressure, earthquake magnitude, temperature, rainfall total or geographic location of a storm. Predictability of pay-out and speed of pay-out are vital, providing certainty that when certain conditions are met a financial payment will be made,” he says.
Natural disasters
Parametric insurance is being utilised in certain jurisdictions, including the US, where natural disasters and extreme weather events occur. “Parametric insurance is expected to be a growth area in the coming years and will not be limited to natural disaster or extreme weather events. It is unlikely to disrupt many traditional products, but it will create new insurance markets and grow the overall market size,” he predicts.
Irish insurtech firms are helping to drive innovation into the market, including Blink, founded in 2016 to build data-driven travel disruption insurance solutions. CPP Group acquired Blink in 2017 enabling it to scale globally from Cork. It made it onto the InsurTech100, an annual list of the world’s most innovative insurtech companies that are solving significant industry problems, generating cost saving or efficiency improvements within insurance. “Blink is now a world leader in parametric insurance product innovation,” he says.
Blink Travel offers an innovative real-time data driven travel disruption solution. Once a traveller registers their flight details, Blink monitors the flight in real-time. Any flight disruption that occurs to the registered flight, automatically results in a traveller being notified instantly.
In areas such as wellness apps, users may worry that the data collected can be used against them.
“Data protection laws will apply to personal data collected via a wellness app. In many instances, the data collected via the app will relate to the health of the user, which is considered to be ‘special category’ data under the GDPR,” says Andreas Carney, technology partner at Pinsent Masons.
“This classification means that there are additional compliance requirements for the insurer to meet in order to legitimately use the data. For example, if the insurer is going to seek to rely on the consent of the individual as a basis for collecting and using the data, the consent needs to be explicit, which is a high bar and requires an express statement of consent from the user, as well as being freely given, specific, informed and an unambiguous indication of the user’s wishes. Ticking all of those boxes can prove challenging where the interface with the user is via an app.”
The volume of personal data that can be collected via a wellness app can be substantial, particularly where it is ‘always on’. “Depending on the settings, it could also collect information about the user that goes beyond what is strictly necessary for the purpose originally intended,” he says.
“With large volumes of data being generated, and at a time when insurers and other businesses alike are seeking to assess what value they can extract from data through AI and other technologies, there may be the temptation to go beyond that original purpose. This potential evolution of how data is used, or ‘function creep’, is something that data protection supervisory authorities are acutely aware of and is something that insurers need to be mindful if they look to offer additional benefits if their customers use a wellness app.”
