When I got involved with ITL, going on nine years ago, because I saw insurance as a target-rich environment for innovation, my outsider perspective made me wonder whether many of the traditional lines of demarcation in the industry weren't artificial.
Why were personal lines and commercial lines such discrete entities, when so many people were starting to operate businesses from their homes or at least mingle their personal lives and their small businesses? Why was life insurance treated as so separate from wealth management, when life insurance could be such an important financial asset? Why did people have so many different pieces of health insurance -- perhaps a group health policy, a personal policy for long-term disability, workers' comp, a piece in auto insurance, etc.? Why did I have to assemble all the pieces myself; why couldn't insurers put together a policy that I could just call Me?
Well, a recent announcement of collaboration between John Hancock and Allstate suggests that some are starting to think about how they might break down those artificial barriers.
This is just a baby step, mind you, but the companies announced that policyholders participating in Hancock's wellness-incentive program, Vitality Plus, can receive “Vitality Points” for safe driving—as certified by participation in Allstate’s Drivewise telematics program. Basically, the companies are combining their insights into customers to produce a joint risk assessment that can lead to lower prices for customers.
Hancock, which monitors their activity via wearables and usage data from a meditation app, is now also incorporating data from Allstate, which accesses data from smartphones for acceleration, deacceleration, speed, locations, etc. to evaluate how safely people drive. Based on the risk assessment, Hancock offers discounts as high as 25%. Allstate policyholders can receive as much as 10% cash back on enrolling in the Drivewise program and as much as 25% cash back at the end of each policy period.
Donald Light, a director in Celent's North America insurance practice, describes some of the potential for what he calls "the great cross-over" in this provocative piece.
For me, it's hard to see that there's lots of utility here. Auto insurers have had a hard enough time interpreting telematics data to better price auto policies, so I don't imagine that data about driving behavior will provide a breakthrough in understanding people's health risks.
But I certainly see marketing opportunities for Hancock and Allstate to jointly reach people who are focused on their safety, broadly defined, and who are thus good risks.
I also like that Hancock and Allstate are setting an example and perhaps spurring other companies to look for alliances that cross traditional lines, where all sorts of opportunities surely lie.
As I've said before -- and will no doubt say again -- when businesses go digital, they get stripped down to their essences, which can then be recombined in any number of surprising, new ways. Once photography became digital, with cameras in every smartphone, just about all the traditional fixtures went away -- stand-alone cameras, film, paper, the related chemicals, the one-hour-photo shops and kiosks and so on. But the essence of photography, the image, actually became far more prevalent and even enabled whole new types of businesses that were far more valuable than Kodak ever was -- try to imagine Facebook, Instagram, TikTok and any number of other businesses without digital images.
Insurance's traditional role in making people whole after a loss is on its way to being stripped down to its essence, which is three things. There is a customer/contract. There is an adjudication mechanism that decides whether a payment should be made and how large it should be. And there is capital. That's it.
Those three elements are currently organized into distribution networks of agents, underwriting departments, claims departments, etc. Insurers are organized by line of business (auto, health, life, workers' comp, etc.). And there are demarcations between insurers, reinsurers and the capital markets.
But those traditional divisions don't have to be there, just because they always have. We're already seeing insurance offerings be embedded into sales of autos and homes. We're seeing diversification of capital sources. And now we see a glimmer of what it might be like if companies cooperate across lines of business in creative ways, as the Hancock wellness program and Allstate telematics program combine data to try to better understand and market to customers.
Progress may take a while to really show up, but I'm optimistic.
Cheers,