Vlad Nanu advises on how to equip yourself with the right tools and strategies to make the shift to loss prevention – an essential part of staying ahead of the game
Prevention is better than cure. For centuries we have tried to not just cure illnesses, but stop them from occurring in the first place. The insurance sector is looking to emulate this approach and is shifting focus from loss compensation to loss prevention, where technological innovation is underpinning this shift and transforming the value proposition.
Historically, the activities surrounding loss prevention were manual, time-consuming tasks, which resulted in limited ability to utilise data collected to drive improvements in the quality of risks underwritten. However, to avoid costly claims, mitigate risk, and meet the growing expectations of customers and shareholders, insurers are now looking to new technologies to drive their loss prevention activities.
One approach is the use of data tracking technology by health and car insurers. Smart devices allow customers to lower their health insurance premiums through fitness tracking, and telematics technology enables drivers to secure better premiums for car insurance by driving more carefully. However, the impact of this type of technology will be much farther reaching. Insurance is a data-driven industry and the ability to collect a substantial amount of information and process trends quickly will greatly impact the future of the sector.
Being able to take advantage of all this data and proactively engaging policyholders in loss prevention will be essential to staying ahead
Traditionally, assumptions have been made based on demographics and geography; however, incentivising behaviour has driven changes. In the health insurance industry, providers have offered fitness tech alongside an incentive to drive users to a healthier lifestyle, reducing the risk they will claim on their policy.
The potential for this type of incentivised loss prevention is huge. Key technology that insurers will need to be aware of includes:
Wearable or personal technology – ‘fit tech’ allows monitoring of heart rate, steps walked and a variety of health-related metrics.
Vehicle monitoring – ‘black boxes’ are no longer confined to aircraft. Commercial and personal vehicles can now monitor braking, speed and distances travelled, meaning cars, ships and other methods of transport can be tracked and assessed.
Property sensors – such as those in factories, warehouses or offices and in-home sensors, including ‘smart thermostats’, security technologies, such as alarms and cameras, and industrial control systems.
Geographical Information Systems – geophysical, topographical, climatological and hydrological data combined with information about utility grids and flight paths, which could include drone and satellite imagery.
From shipping companies installing breathalysers to ensure crew are sober, to an oil rig using virtual reality to train employees in a danger-free way, there are so many ways that tech will undoubtedly impact the way we calculate risk and, therefore, insurance. The only limit will be the limits of insurers’ imagination.
With the internet being integrated into more and more consumer tech, it’s not inconceivable to envision a future in which our bed logs how much time we are sleeping, our freezer is aware of the amount of ice cream we consume and our fitness app monitors how much we exercise.
For the insurance sector, embracing new technological advancements will need software developed to handle the vast amount of data and make premium adjustments based on the information gathered. This technology also allows for:
A more valuable and transparent relationship between insurers and their customers, and a reduction in the frequency and severity of losses through data analytics.
Faster, more accurate pricing and underwriting through real-time access to online surveys and reports.
Integrated access to business risk information and surveys, which provide valuable insights into common denominators and allow the creation of targeted loss prevention activities.
The integration of compliance management to ensure processes and individual roles meet not only legal and regulatory requirements, but also those pertaining to the insurer.
Being able to take advantage of all this data and proactively engaging policyholders in loss prevention will be essential to staying ahead. The more agile, forward-thinking insurance brokers and underwriters will have a huge advantage over those stuck in the traditional mindset of loss compensation.