By Greg Barcomb
Technology is changing the world around us. From technology in our cars communicating with the car in front to keep a safe distance to technology turning video games into virtual reality worlds! (Did you evet get told “don’t sit too close to the TV”, as a kid? Yeah well now we are strapping the TV right to our face…..go figure) The technology is advancing so quickly they don’t even have enough time to come up with cool names for it all- they just call it all the IOT- the Internet of Things. Really? Don’t we have anything better than that? In a world full of amazing acronym’s no one thought of anything else? These rapid changes in our everyday life are affecting almost every industry and the world of insurance is no different. But more important than just knowing the IOT world is impacting insurance, it is important to know how these technologies are changing the business and what impact it all has on you- the consumer.
We all have the same goal when it comes to buying insurance. We want the best available coverages to help when something goes wrong and all at the lowest price possible. So what impacts the price we pay for insurance? What are the expenses that an insurance company needs to pay out that can be lowered by advancing technologies? Here are the main two: Underwriting and Loss Ratio.
“Underwriting” is basically assessing the risk, determining what the chances of a loss are, and putting a value to it. The term comes from the old Lloyd’s of London writing their names “under” each other to agree to share the cost if a ship traveling to America was lost at sea. Now, technologies like artificial intelligence and predictive analytics already very much exist in insurance companies (aka the online quote). But what is being developed now is an insurance company using a drone with Go-Pro’s to do a site visit instead of an inspector taking the day to drive out. Buildings are now being drawn in 3D so underwriters can do a virtual reality visit to see the kind of roof and frame of a building. All could cut the costs associated with underwriting, hence saving you premium without sacrificing coverage.
The other major cost is the big one- the loss ratio; or simply the percentage an insurance company pays out in claims compared to the amount of premium collected. A quick insurance 101 tells us that insurance is risk sharing. The group’s resources are pooled together and claims are paid out of that pool. The lower the amount of money taken out to pay for claims, the lower the cost to the consumer.
The most important question from a risk manager should be: how can we best prevent and reduce the cost associated with a loss? The stereotype of the industry is to have claims adjusters find out every way possible to not pay. While that is typically not true technology is able to help offer a better answer. Real time data from SmartHomes now can turn off the water if it detects a leak, not only detect a fire but alert the fire department for you significantly cutting the response time. SmartCity’s now allow for the traffic lights to communicate with emergency vehicles to help them get to an accident scene faster potentially saving lives. All have the goal of making the world safer. Alerting you when something isn’t right to AVOID or LESSEN the damage (loss ratio) will help in lowering costs without affecting the coverage you need in case the worst in unavoidable.
Now, these technologies are best utilized when they assist insurance professionals to be more effective. The fear is that these technologies are somehow going to replace the millions of people working in the insurance industry to help protect their family, friends and neighbors. It isn’t the case. Ten Eyck Group and other agents and carriers who are embracing these technologies without fear, are who you can look to for help when developing your program and best protect what is important for you not only today, but for whatever tomorrow may bring.
Contact Ten Eyck Group today at (518) 464-0059 for all of your Albany insurance needs!