9AUGUST 2021warnings in their telematics programs. This live feedback ­ from line departure warnings to alerts about upcoming risky intersections ­ influence driving behaviour and allows insurers to reduce expected losses. Water leakage sensors are one of the most cited preventive services in home insurance. However, as of today, insurers have struggled to introduce approaches that generate substantial demand and a sustainable business case. Finding a sustainable business case in the smart home insurance market is challenging, but on-going innovations should make homeowners the ultimate winners. Bundling risk prevention with other customer services, such as security, has been the most successful approach to date. The sustainable business case is built on a bundle of different services ­ some sold after the purchase ­ and on the reduced churn rates built through customer engagement. Life and health is the least mature field for real-time risk mitigation services. There have been many insurance pilots over the past few years around early detection, care optimisation and medication adherence but only a few examples have scaled to market level. Reasons for the slow pace of adoption in the life and health space include:· Health costs in most countries are not fully covered by insurers· Entering into the medical device space would mean entering into the medical regulatory field· Medical advice comes with significant responsibility and requires deep and specialist knowledge· To execute at scale, insurers would need to deal with many different medical service providers.Real-time risk prevention services and approaches to them are very heterogeneous. The only common denominator is that all successful services are based on a multi-year journey.Promoting less risky behaviourThe second way to prevent risk is to encourage less risky behaviour. Insurers have a role to play in creating a positive safety culture and raising awareness in society.We distilled a three pillar concept from the successful examples:1. Create awareness of the current risk level2. Suggest a change in behaviour3. Incentivise the change in behaviour The sustainable adoption of safer habits for the benefit of all stakeholders can only happen when all three pillars are successfully implemented. Reward systems that incentivise and reinforce positive behaviour are the most important aspect. The customer's perception of the value of the rewards, their cultural context and frequency, and the intersection with behavioural economics are all integral. Changes in human behaviour are also instinctive; a combination of behavioural economics and gamification to engage individuals is therefore needed to help to drive behavioural change. The most mature business line is life and health. Fully individualised suggestions and challenges are provided to customers based on the number of steps registered by their mobile phone or physical activity data from wearables. In personal auto telematics, customers often receive a detailed analysis of their driving style via a dashboard in a mobile app. Many insurers also automatically display tips for improving the driving score, or introduce contests on specific `issues' ­ so-called leaderboards. In commercial lines, IoT data are being used to enhance the activities of the loss control teams and to provide periodic safety insights to risk managers and supervisors of the insured companies.The real-life case studies on promoting safer behaviour afforded the following key findings:· The reward system needs to be set up to reinforce positive behaviour. The reachability of the reward is key.· There are cultural aspects to incentivisation. It is extremely important to find compelling benefits and rewards that engage target customers. What works in one country does not necessarily work in another. Further, the rewards must be explicit and tangible. For example, monthly cashback on fuel costs are effective, but a free weekly coffee also materially influences behaviour. · Frequency is key. A yearly premium discount is not enough. Positive engagement must be nurtured on a short-term basis. This mechanism gives people a reason to come back to the platform.Enablers of prevention servicesThe integration of technology into prevention services greatly increases complexity. As a result, the enablers for success are the effective business transformation, cultural change and understanding of the corresponding financial management rather than the technology itself. The main obstacle is not technology but people. From our interviews, we identified the following as the main success factors:· C-level commitment· Development of vision and strategy· Development of culture and capabilities· Finding an effective value sharing scheme with the customer· Management of new and complex financialsFrom our interviews, we found that several new elements need to be considered in the financial management of this new paradigm, such as service fees, partner contributions, self-selection effects and net IoT costs, which are harder to integrate into the economics of traditional insurance products. Based on the unique insights from the interviews and the real-life examples, the report provides recommendations for insurers, regulators and tech companies. The insights should motivate insurers in different business lines and geographies to question which of their clients' risks should be mitigated and what is the best approach for doing so. ITO
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