The success of insurance companies always has been predicated on their ability to collect, understand and act on information they collect throughout the insurance value chain. That same logic appears to be the motivation behind a rising number of telematics and analytics technology providers entering alliances, if not executing mergers and acquisitions, according to industry experts. Just this spring and summer, new alliances include:
- Verisk Analytics partnering with IMS for telematics scoring and with Vehcon for a usage-based insurance mobile app
- CGI signing on with Baseline Telematics for usage-based insurance rating
- Telit Wireless and Agnik working on a combined platform for Internet of Things data in insurance
- Saama and HortonWorks, horizontally focused analytics and Hadoop companies, respectively, partnering for an insurance-specific analytics product
- AIR Worldwide tapping into Actian analytics for its catastrophe modeling product Touchstone
The motivation behind the deals, explains Donald Light, director of Celent's North America P&C insurance practice, is the desire to offer a more complete set of tools to insurers, and to reduce the costs and risks associated with big data projects.
“There’s real value in the results of the analytics from the data produced by telematics devices,” Light says. “But this is an integrated system. You need all three parts: the generation of data, the ability to analyze the data, and then the feedback,” which is used for scoring, gamification and social applications, he says. “The challenge for insurance companies is that in a lot of cases they do not have the ability, inclination or desire to analyze this huge amount of new data that these network sensors are throwing off,” Light says.
As business intelligence and analytics technologies have become more capable, many insurers have developed strategies around internal and easily-accessible external data sources, explains Monique Hesseling, partner at insurance consultancy Strategy Meets Action. More recently, however, insurers have come to the conclusion that they can augment internal data with data from sensors and the Internet of Things (IoT) to service and protect customers better, offer more individualized propositions, manage risks better and handle claims faster and more effectively.
“When combined with data already available within insurance companies, this new data will provide carriers with additional insights on both risks and customer behaviors, allowing them to service their clients with better products and improved claims handling. Ultimately, it will all benefit policy holders,” Hesseling says.
For insurers the problem has two parts, Light adds. First, the data is unfamiliar, second, insurers need data scientists and adequate tools, both of which are expensive and difficult to find. “So, there’s a natural opportunity for someone to aggregate the data, apply the analytic tools and generate scores.” As result, Light says he expects to see more deals of this type.
Thuy Osman, a research and consulting manager at Novarica, says technology companies are adding capabilities and functionality, frequently through mergers, acquisitions and partnerships in an effort to be more easy to do business with. For vendors of telematics, standing out from the crowd means being a one-stop shop, she explains, and the quickest way to gain more capabilities is to acquire or partner.
“In the last few years we’ve seen telematics service providers offer device, data collection and analysis. Through acquisitions, mainly Verizon’s acquisition of Hughes Telematics in 2012, connectivity is now also an offering,” Osman says. “Following Verizon’s play, Sprint partnered with DriveSync in 2014 to offer IMS UBI Intelligence. AT&T also has an insurance telematics offering for fleets.”
But telecoms aren’t the only ones entering the telematics space. “Connected car is another important player in usage-based insurance,” Osman says. “Acquisition activity you see here is Sirius XM's acquisition of Agero's connected vehicle services unit in 2013. There’s also the partnership between Progressive’s Snapshot and Onstar, affirming the importance of connected car in the UBI space. Not only do you see partnerships and acquisitions to add related and cross capabilities to bring everything under one house, you also see acquisitions to expand current capabilities, exemplified by LexisNexis’s acquisition of Wunelli in 2014."
Tom Benton, vice president of research and consulting at Novarica adds that the current lack of standards within the IoT technology space is another important driver of the trend, as most insurers’ current technology cannot handle the huge volumes of data created by IoT devices. As a result, insurers increasingly will rely on third-parties to collect, host and analyze that data. “2015 is the year the future arrives,” Benton says.
This article courtesy of Information Management's sister brand, Insurance Networking News.
Register or login for access to this item and much more
All Information Management content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access