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TRANSCRIPT
December 1, 2016
Christopher M. Holt, ACAS, MAAALegaré Gresham, FCAS, MAAA
Insurance and Technology: Are You Prepared for the Coming Disruptions?
1
About Presenters
• Christopher M. Holt, ACAS, MAAA• Consulting Actuary• Atlanta, Georgia• Pinnacle Actuarial Resources, Inc.
• Legaré Gresham, FCAS, MAAA• Consulting Actuary• Atlanta, Georgia• Pinnacle Actuarial Resources, Inc.
2
• Introduction
• Future Technologies
– Autonomous / Driverless Cars
– Wearables
– Connected Homes
– Drones
– Financial Technology
– Artificial Intelligence
• Wrap-up
Agenda
3
Introduction - “May you live in interesting times!”
Sources: U.S. Patent and Trademark Officehttps://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.htmhttp://www.multpl.com/united-states-population/table
4
• Driverless - A robotic vehicle that is designed to travel between destinations without a human operator
• Sometimes called a self-driving car, an automated car or an autonomous vehicle
Autonomous/Driverless Cars
5
• Where are we now?
– Features already available on mainstream cars include self parking, adaptive cruise control, lane-keeping, automatic braking (classified as Level 2 by NHTSA)
– Testing of Levels 3 and 4 ongoing
Autonomous/Driverless Cars
6
• Where are we now?
– Features already available on mainstream cars include self parking, adaptive cruise control, lane-keeping, automatic braking (classified as Level 2 by NHTSA)
– Testing of Levels 3 and 4 ongoing
• Where might this go?
– Will we skip Level 3?
– Level 4 – As early as 2019?
– Could car ownership become a thing of the past?
Autonomous/Driverless Cars
7
• Change in how we drive– Car ownership – Average vehicle age ~11.5 years– Number of vehicles/miles driven
• Claims– Frequency decrease– Severity increase – Injury/Repair
• Liability – Who’s at fault?• Insurance Regulation
– No-fault– Tort systems
• Underwriting– Use of telematics/UBI– Who is buying/selling policies?
• Cyber Risk• APEX on December 15
Effects of Autonomous/Driverless Cars
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• Electronics that can be worn on the body, either as an accessory or as part of material used in clothing.
• One of the major features of wearable technology is its ability to connect to the Internet, enabling data to be exchanged between a network and the device.
Wearables
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• Where are we now?
– Wristbands/Smartwatches/Glasses
– Usually need to pair with another device
– Bulky
– Limited battery life
– Accuracy Concerns
Wearables
0
5,000
10,000
15,000
20,000
25,000
2010 2011 2012 2013 2014 2015
Number of Fitbit devices sold worldwide from 2010 to 2015 (in
1,000s)
Source: https://www.statista.com/statistics/472591/fitbit-devices-sold
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• Where are we now?
– Wristbands/Smartwatches/Glasses
– Usually need to pair with another device
– Bulky
– Limited battery life
– Accuracy Concerns
• Where might this go?
– Wearable clothing – power source?
– Nanosensors – Heart rate sensors, speech
– Synthetic skin
Wearables
0
5,000
10,000
15,000
20,000
25,000
2010 2011 2012 2013 2014 2015
Number of Fitbit devices sold worldwide from 2010 to 2015 (in
1,000s)
Source: https://www.statista.com/statistics/472591/fitbit-devices-sold
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• Marketing/Underwriting– New product development
– Bonus/penalty programs
• Risk Management– Monitoring pilot or truck driver fatigue
– Return-to-work programs
• Workers’ Compensation– Monitoring personnel handling hazardous materials or in
dangerous situations
– Tracking the position and status of employees
– Is there liability because company does not invest in wearable?
Effects of Wearables
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• Health/Life Insurance
• Claims Management
– Document damages, take statements, share with others
– Document lifestyle changes
• Cyber Risk/Privacy Concerns
Effects of Wearables
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– A development of the Internet in which everyday objects have network connectivity, allowing them to send and receive data
Connected Homes/Products
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• Where are we now?– Cool Gadgets
• Refrigerators – cameras, smart screens
• Learning Systems – thermostats, smoke alarms
• Security Systems
• Voice Control Systems – Alexa, Google Home
– Fragmented
– Costly
Connected Homes/Products
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• Where are we now?– Cool Gadgets
• Refrigerators – cameras, smart screens
• Learning Systems – thermostats, smoke alarms
• Security Systems
• Voice Control Systems – Alexa, Google Home
– Fragmented
– Costly
• Where might this go?– Home systems will be automated, personalized and optimized
– Connected classrooms/connected communities
Connected Homes/Products
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• Risk Management
– Monitoring home or workspace
• Privacy Concerns
– Availability on the web
• Product Liability
• Cyber Risk
– Peeping – or “Cyber” – Toms
– False alerts
– Criminal use of data
Effects of Connected Homes/Products
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• An aircraft without a human pilot aboard
• Also referred to as an unpiloted aerial vehicle and a remotely piloted aircraft by the International Civil Aviation Organization
Drones
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Drones
• Where are we now?– Delivering burritos at Virginia Tech
– Racing drones
– Surfing with drones
– Drones kill Dallas shooter
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• Where are we now?– Delivering burritos at Virginia Tech
– Racing drones
– Surfing with drones
– Drones kill Dallas shooter
• Where might this go? (FAA Part 107)– Hazardous jobs
– Meter reading
– Construction
– Spying
Drones
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• Insurance
– Commercial and Personal Liability Insurance
– Property Considerations
• Can view property remotely to bind coverage
• Can view an insured’s roof without climbing up
• Can send to crash site
– Privacy Concerns
– Product Liability
Effects of Drones on Insurance
21
• Over 40 recalls since 2002, notably:
– Individual parts tested/certified but parts may not have been tested together
– Competition/rush to market
Drones and Lithium Ion Batteries
Year Event
2006 Sony recalls ~9.6 million laptop batteries
2013 Boeing grounds 787 Dreamliners for several
months due to overheating batteries igniting
2015 Several airlines stop carrying bulk shipments
after series of explosions beginning in 2010
2015 Exploding hoverboards
2016 Samsung Galaxy Note 7
2010-
Present
Plug-In electric vehicle fires
Source: http://www.livescience.com/50643-watch-lithium-battery-explode.htm
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• An industry composed of companies that use technology to make financial services, enable provision of financial services (through utilization of technology) or drive technological innovation in provision of financial services
• Also known as FinTech
Financial Technology
Source: http://www.coindesk.com/data/bitcoin-daily-transactions
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• Where are we now?– Amazon.com
– PayPal, other on-line billing services
– eTrade
– Openbazaar.org
Financial Technology
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• Where are we now?– Amazon.com
– PayPal, other on-line billing services
– eTrade
– Openbazaar.org
• Where might this go?– Full peer-to-peer transactions
– Contract binding
– New payment methods or currencies
Financial Technology
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• Potential benefits of new technology– Validates with virtually no human interaction
– Faster delivery
– Lower friction and better visibility
– Distributed
– Avoids intermediaries
• Results/Effects– Disruption of current system
– Unregulated
– Anonymous
– Industries: payments, lending, asset management, insurance, exchanges
• Will it still be insurance?
Benefits and Effects of FinTech
Source: http://www.mckinsey.com/industries/financial-services/our-insights/cutting-through-the-noise-around-financial-technology
26
• The theory and development of computer systems able to perform tasks that normally require human intelligence, such as visual perception, speech recognition, decision-making, and translation between language
Artificial Intelligence
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• Where are we now?
– Neural networks or machine learning
– Optical charter recognition
– Driverless cars
– Watson – natural language processing
– Abie – Allstate Business Insurance Expert
– Evia – Insurify (virtual insurance agent)
Source: Bloomberg Technology
Artificial Intelligence
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• Reasons for breakthroughs
– Cheap parallel computation
– Big data
– Better algorithms
• Benefits to Insurers
– Efficiency
– Effectiveness
– Risk selection and assessment
Artificial Intelligence
Source: Bloomberg Technology
29
• Where might this go?
– Underwriting and risk identification
– Customer experience
– Claims handling
– Fraud
– Actuarial
Artificial Intelligence
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Autonomous / Driverless Cars
Wearables
Connected Homes
Polling Question
Which technology do you think will have the greatest impact on insurance in the next 5 years?
Drones
Financial Technology
A
B
C
D
E
Artificial IntelligenceF
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Questions
32
Join Us for the Next APEX Webinar
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• We’d like your feedback and suggestions
• Please complete our survey
• For copies of this APEX presentation
• Visit the Resource Knowledge Center at Pinnacleactuaries.com
Final notes
34Commitment Beyond Numbers
Thank You for Your Time and Attention
Chris Holt
Legaré Gresham