Emerging Technologies Impacting Claims. Joe Louwagie Head of Strategy Verisk Insurance Solutions - Claims

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1 Emerging Technologies Impacting Claims Joe Louwagie Head of Strategy Verisk Insurance Solutions - Claims

2 Organizational Overview Verisk Insurance Solutions VIS Claims Vision Underwriting & Rating VIS Support - Global Business Dev - Marketing - Technology Claims AIR Revolutionise how the P&C Claims function is managed and be recognised by our customers as thought leaders who create the future ISO Solutions Underwriting Personal and Commercial Lines ISO Claims Analytics Xactware VERISK Claims: Not a technology company.claims people who understand technology 2

3 The transformative change in seeking to be unique...vs. seeking to be the best.and its impact on insurance Competing to be the best almost guarantees mediocre performance. Business is not sports or war. To win you have to compete to be unique Michael Porter paraphrased, Harvard Business Review Creating unique value propositions and disrupting giants. Could it happen to Insurance? Is it disruption..or collaboration? 3

4 The Insurance Innovation Dilemma 86% Of companies on the Fortune 500 list in 1955 are gone. Why?.they failed to remain relevant by innovating to their customers needs 74% Of insurers lack the internal core skills needed to drive innovation 79% Of insurers are already running just to keep up with day-to-day requirements, even though they clearly recognise the innovation imperative 63% Of insurers are less likely than companies in other industries to have innovation strategies aligned with their growth objectives 28% Of insurance executives said they re already being disrupted by new, more nimble competitors Top 3 barriers: To insurer innovation: 1. Insufficient skills 2. Inadequate funding 3. Conservative culture that discourages trial and error Source: KPMG: Insurance Innovates 4

5 Insurtech in 2017; first movers and.fast followers 5

6 So where is the InsurTech?.from nowhere to everywhere in 24 months 6

7 Claims and Weather Analytics at a Macro level The importance of PIF overlays to weather data Commercial Insurance Personal Insurance Granular real-time weather analytics is no longer a luxury.not having it is a competitive disadvantage 7

8 Claims and Weather Analytics at a Micro level Leveraging mapping technology to assign claims Quickly identify extent of probable damage Matching claim size to skill level Increased efficiency and reduced LAE Severity control with assignment accuracy Compresses cycle time and improves service What s next? Real-time event images as it happens and pre-event high probability notification coordinated by planes, drones, and on the ground sources; mapping out damages starting from the hardest hit areas to the outer rings of lesser damage. 8 8

9 Claims Related New Technology Development at Warp Speed Dimension rooms Diagram structures Mobile Device Wifi based 3D Imaging through Walls Thermal Imaging Next; Thermal via Drones The growth in computing power is outpacing the ability to develop corresponding analytics and SAAS solutions 9

10 Smart Phones of the Future and the Impact to Claims Augmented Reality Built-in Projector Word/Tone/Pace Algorithms Truth Propensity Scoring 3D Screens & Holograms Will we even have phones? 10

11 Insurance Industry in 2017 Monitoring potentially disruptive innovation Robotic Process Automation RPA Blockchain Tech Targets repetitive tasks Many emerging RPA Start-ups 25% of insurance jobs.or not Especially applicable to claims Same technology used in Bitcoin concept Actual insurance uses still more theoretical The focus of start-ups to trigger EFT pmts. Lots of start-ups targeting insurance The next internet or just a glorified database? 11

12 Insurance Industry in 2017 Monitoring disruptive innovation Social Intelligence Artificial InteI Cultural trends increasing the amount of social data available Web-crawling 100M sites and turning it into business insights Using social media sourced data and predictive analytics Use case; social media use predictive towards work status Use case; networks indicate propensity of non-randomness 75% of insurance execs believe it will play a disruptive role Amid so much data, AI can analyse it and find the connections Helps discover insights that can t be found by humans Continually evolves and improves Simulates human brain functions to solve problems Continually evolves based on new outcomes, solutions, data 12

13 From Big Data to Prescriptive Analytics 75% of insurance executives believe AI will significantly alter or completely transform the insurance industry in the next three years. - Technology Vision for Insurance annual report

14 From Big Data to Prescriptive Analytics; Examples of Machine Learning Combine multiple underlying data attributes, often in complex mathematical or logical forms, to estimate the likelihood or magnitude of an event or outcome that has not yet been observed or confirmed Outlier Detection Clustering Techniques Decision Trees Logistic Regression Neural Networks Weather Analytics at Lodgment Pattern recognition and fraud rings Repair vs. total loss analysis; estimate amounts Likelihood of injury at Lodgment Photo analysis to determine damages 14

15 What s Important to Our Claims Executive Clients? Optimized FNOL Triaging Policyholder Collaboration Mitigating Damage Exposure Optimized Operational Costs Real-time Analytics Loss Forensics Suspicious Claim Identification Reduced Cycle Time Increased Customer Satisfaction Automated Claim Handling 2017 Verisk Analytics, Inc. All rights reserved. 15

16 The two conflicting claims priorities ~40% No Touch Automated Claim FNOL FUTURE STATE Policyholder Collaboration CURRENT STATE Routing & Assessment Decisions AI / Cognitive Engine Business Impact ~20% ~30% * Low Touch Desktop Loss Verisk Analytics, Inc. All rights reserved. Better Outcomes Faster Cycle Times Cheaper Expenses ~30% ~80% Conventional Adjusting The push towards automated adjusting increases the urgent need for automated fraud detection 16

17 Verisk Claims Analytics Providing SmartFeatures to fight fraud Feature Combinations, Scores, and Indices Created by combining a multitude of raw data elements From proprietary (e.g., Claimsearch) as well as other data sources Developed using powerful AI techniques applied to market data Rate of claims compared to a similar cohort Rate of claims across different policy types Normalized score of the types of roles Rate of carrier change vs cohort % of high risk property claims (theft, burglary, mysterious disappearance, etc.) Historical Claim Index Claims By Policy Index Claim Roles Score Carrier Switching Likelihood High Risk Losses Score Involved Party 12 Month Index 60 Month Index Claims by Policy Index Verisk Analytics, Inc. All rights reserved. Claim Roles Score Carrier Switching Mickey Mouse % Iron Man % Data Science teams can use SmartFeatures as independent predictors in their fraud model building 17

18 Extending SmartFeatures Medical Record Text Analytics Adjuster Notes IT APPEARS THAT THIS WAS A LOW-IMPACT COLLISION WHERE THE INSURED S FOOT SLIPED OFF THE BRAKE, AND SHE ROLLED INTO THE REAR OF THE CLAIMANT. THIS IS CONSSTENT WITH THE FACT THAT THERE WAS NO PROPERYT DAMAGE CLAIM MADE TO THE CLAIMANT VEHICLE. Accident Image Image Analytics Image SmartFeatures Verisk Analytics, Inc. All rights reserved. = Refer to SIU = Alert adjuster = Settle claim 18

19 Insurance Industry in 2017 Image and video forensics 3D models Images Videos Recognise objects and words Capture and store data Recognise Interior furnishings Verify digital / metadata integrity Two BIG Questions: Photos and repair vs. total decision automation Photos leading to property and auto loss estimation Applying military grade intelligence to insurance Recognise damages and calculate measurements Facial expression and movement pattern recognition Using video patterns and predictive analytics Video learning to assess accident liability percentages Identifying imperfections through 3D images 3D auto estimating being tested with live claims Start-ups starting to advance damage recognition Enhancements to automation improving by the month 19

20 3D Auto Scanning Auto technology Lasers and 3D auto scanning 3d scan identifies damages through imperfections as compared to the standard Nationwide now has drive-in centers that use lasers to identify the imperfections The imperfections are fed into an estimate which will eventually be converted to an automated payment Mobile device capability will create two automated estimating possibilities via (1) photos and (2) 3D 20

21 Call Center technology that will Impact Claims Web crawling, AI, chatbots and predictive analytics in phone calls Software craws the web Feeds into AI analyser Predictive analytics suggest style Service consultant customises interactions Eventually completed by.bots? June 8, 2017; IBM launched insurance chatbot NEAR FUTURE: Technology will allow us to know our customers better and optimise how the customer perceives great service 21

22 Innovation Claims technology topics on a global scale Mobile diagramming - 5 phases Drone diagramming is here Wearables and bio data Mobile Diagramming Aerial Imagery Global data shift with IOT SmartThings wants to eviscerate the home insurance industry Forbes magazine 8/14/14 Wearable Devices Internet of Things 22

23 Emerging Technology and the Insurance Impact IOT devices, SMART homes, and changing frequency patterns Data kings will be manufacturers of SMART items New models needed for premium calculation Significant discounts (25%) for SMART devices Slow companies at a competitive disadvantage SMARTER homes equals fewer claims Long weekend water loss; 3000 litre loss reduced to 40 litres of water Automatic lodgement from smart home device One day vs. many day settlement Significant indemnity/service impact The next BIG IOT transformation: broad use in the market for devices that shut off the water at the main source to the home when a water leak is detected 23

24 Solar Shingles 3D Models Technology Impacting Claims Changing materials in homes and vehicles $22/sf cost is less than regular roof cost Pays for itself due to solar energy offset 3x stronger than slate shingles Released summer 2017; intl. by 2018 Building IOT and commercial application 20,000 parts down to less than 50 Will OEMs acquire or offer a 3D option? 3D house printed in 24 hours Cost is $10,000; printed entirely on-site 24

25 Connected Cars, Telematics and Autonomous Vehicles Collects more data about customers than any other means of data collection: Location of the vehicle and the person Driving behavior Destination and duration of the vehicle Driving time of day and area as related to risk Vehicle diagnostics constantly.and before / during / after an accident. 25

26 Reach of the Connected Car UBI Most insurers are here 26

27 Technology and Underwriting Impact Disruptive trends; telematics, autonomous vehicles & ridesharing Autonomous vehicles Timetable for when vast use gets closer 85%-95% of crashes due to driver error Ride-sharing trend Frequency reduction before autonomy Car sharing predicted to become the norm Vast and widespread adaptation by millennials Cost drops precipitously after autonomy NEAR FUTURE: Rideshare cost drops significantly and car ownership culture once the cost of labour is replaced with the autonomous vehicle 27

28 Additional factors that could exacerbate the premium shift.. Premium Reduction Impact: Range of electric cars Safety sensors even when not in autonomous mode Tesla and direct insurance Direct OEM insurance 28

29 The Rise and Fall of Auto Premiums KPMG June 28, 2017: Autonomous vehicles could shrink auto insurance sector by 71% through This equates to reduction of $137B. In 2015 KPMG estimated a 60% contraction by Primary driver is a 90% reduction in accident frequency They recommend insurers to make strategic and tactical changes well before. Accenture / Stevens Institute of Technology; May 2017: $81B in new premiums over next five years 57% increase in product liability insurance by 2050 (KPMG) Rising need of public infrastructure insurance Report predicts $81B rise by 2025, then beginning of sharp decline starting in

30 The re-emergence of Google glass and the impact to claims NOT SO FAR FUTURE?: Imagine tying what we talked about today into something easy to use and transmit..at anytime. 30

31 New Technology The big questions...how does the industry respond How do insurers apply and adapt to this technology? How high is the % ceiling of desk assessed claims? How high is the % ceiling for straight through processed claims? How fast will these trends expand globally? How can companies maintain competitive advantage Adapt technology to minimize assessment cost Create a unique value proposition Create a culture that embraces rapid change Consider diversification Allstate Chief Executive Officer Tom Wilson is diversifying operations as the auto insurance industry faces disruption from driverless cars and ride-sharing services like Uber Technologies Inc. When analysts pushed for more clarity around SquareTrade s metrics, the CEO said that revenue was climbing and that the company, started in 1999, has opportunities to expand. - Related to January 2017 purchase of SquareTrade 31