Like the motor manufacturing sector, the motor insurance sector has been employing more and more technology into its processes, from purchasing, to claims assessment and settlement. We take a look at the various ways motor insurers have been utilising technology in the field.
A report by KPMG says that aside from health and life coverage, there can be few areas more appropriate for InsurTech to influence the behaviour of policyholders in Hong Kong than in the area of auto coverage.
With Hong Kong Federation of Insurers (HKFI) pro-actively looking into the blockchain and safe data sharing solutions, which will come into force in the near future in Hong Kong. Smart cars, smart objects, and smart contracts could become a new normal in the motor insurance scene in Hong Kong and could have a positive impact on the insurance industry and among Hong Kong drivers.
Telematics to drive industry
Telematics offers much more than access to coverage for high-risk groups above and below a certain age. It can reward all policyholders with lower premiums if they are prepared to reduce risk by adjusting their behaviour behind the wheel.
Mature markets may face a difficult future, such as Australia and possibly the UK, where the telematics saturation point has been reached even without it being mandatory. More sophisticated insurTech platforms are in development that are expected to adjust the risk - and the premium - as the insured is driving, indicating who the carrier is in real time according to driving risk and location.
Mobility as a service (MAAS), where a car use is consumed as a service, is growing in many metropolitan areas. Insurers may finally understand that the route to a profitable auto business is not in the race to the bottom, but likely in developing the auto insurance ecosystem of the future that starts at the car’s dashboard.
The insurance dilemma?
Automated vehicles have somewhat dominated telematics in the debate concerning the future of auto insurance. There is good reason, as the development of driverless vehicles is being undertaken by companies that do not have a transport market pedigree, like Alphabet’s Waymo, but see the opportunities of providing MAAS.
This raises an interesting philosophical question as to who the insured should be in the event of an accident - the owner, the operator or the vehicle itself? As autonomous vehicles enter the market, coverage may shift from the individual to corporates seeking liability coverage, or individual policies for each individual vehicle.
Those companies that do not engage in telematics may find they have no value in the emerging ecosystems as the data generated provides insights for risk reduction and assistance in the event of claims.
Asia’s first application of blockchain in motor insurance
The HKFI in early 2019 launched its motor insurance distributed ledger technology (DLT)-based authentication system (MIDAS), a blockchain application to help authenticate motor insurance cover notes/policies.
HKFI along with InsurTech, CryptoBLK released the industry-wide motor insurance authentication system that harnesses DLT to ensure the authenticity of motor insurance documents and fight against fraudulent cases.
CryptoBLK targets to go further and deeper, with an aim to provision the digitisation of documents for the insurance industry and is exploring the opportunity to digitise policy documents from document generation, sharing to authentication, all carried out and supported on one single trusted DLT platform.
This gives high efficiency, security and trust to insurers, policyholders and government departments with just a few clicks to complete the entire verification process.
Car owners can use specific QR codes generated by MIDAS and have their motor insurance cover notes/policies authenticated at all of four licensing offices of the Transport Department. Each single record created is immutable and traceable.
MIDAS was initiated by HKFI in April 2017 and the project deployed cutting-edge DLT, conducted two user acceptance tests and had its system and data security duly verified by an international consultant firm.
Realtime data to reduce motor insurance rates
Online-only insurer Zhong An P&C Insurance predicts that motor insurance rates will fall in the future due to a lower number of claims, as 5G technology will generate more real-time data and reports following an accident which will allow much faster investigations and claim settlement.
Risk calculations will be made more accurately and costs related to claims will be further reduced, the Hong Kong-listed company said.
With a smart 5G strategy, insurance companies could upgrade sales and service models, innovate more customised protection plans and improve their operational efficiency.
With increased connectivity, a key area for insurers will be the streamlining of the IoT, as faster speeds can alert underwriters in the event of an accident and capture vital information to speed up the claims process.
Zhong An Online P&C Insurance aims to ride on the 5G wave to develop more innovative insurance products, improve risk assessment capabilities and deliver intelligent claims services for customers and the auto insurance sector.
The autonomous or semi-driverless car industry is expected to see development that will transform the traditional car insurance segment, a major contributor in China’s non-life insurance business.
Zhong An estimates that more policies will emerge related to various assistant systems for autonomous driving while demand for theft insurance may drop and the cover may even disappear in the future.
In terms of risk assessment and claims prevention, the online insurer said it has allied with 16 enterprises in the fields of auto technology and auto finance to build a relevant big data system, aiming to offer partners with solutions for insurance plan pricing, data sharing and fraud.
Insurance Authority’s InsurTech Corner
The Insurance Authority (IA) has launched various initiatives to promote InsurTech development in Hong Kong and these include:
InsurTech Sandbox
The IA launched an InsurTech Sandbox in September 2017 to facilitate a pilot run of innovative InsurTech applications by authorized insurers to be applied in their business operations. Riding on its experience, the IA has extended the scope of its sandbox to include licensed insurance broker companies.
The sandbox will be beneficial to the insurance industry. Authorised insurers or licensed insurance broker companies testing new InsurTech initiatives under the sandbox can gain real market data and information of user experience in a controlled environment before launching them into the market. At the same time, the sandbox would provide inputs to the IA for refining its supervisory requirements, taking into account the latest technological applications by the insurance industry.
Insurtech facilitation team
The IA has established the InsurTech facilitation team to enhance the communication with business involved in the development and application of Insurtech in Hong Kong, as well as to promote Hong Kong as an InsurTech hub in Asia.
The team aims at facilitating the InsurTech community’s understanding of the current regulatory regime, act as a platform for exchanging ideas of innovative InsurTech initiatives among stakeholders and provide advice on InsurTech-related topics as appropriate.
Establishing the Future Task Force
The Future Task Force (FTF) of the insurance industry has been set up to explore the future of the insurance sector and draw up recommendations. Out of the three working groups under the FTF, the embracing fintech in Hong Kong working group focuses on promoting the application of fintech in the insurance industry.
GFIN membership
The IA has become a member of the Global Financial Innovation Network (GFIN), which is an international network of financial regulators and related organisations committed to supporting financial innovation in the interests of consumers.
The GFIN seeks to provide a more efficient way for innovative firms to interact with regulators, helping them navigate between countries as they look to scale new ideas. This includes a pilot for firms wishing to test innovative products, services or business models across more than one jurisdiction. It also aims to create a new framework for co-operation between financial services regulators on innovation related topics, sharing different experiences and approaches. A