Sponsored content: Tim Johnson, partner at Browne Jacobson, warns insurance firms not to forget the old kid on the block just yet

There’s been much talk recently over the potential transformational impact artificial intelligence (AI) will have on the insurance sector.

Tim Johnson Browne Jacobson

Tim Johnson 

Whilst there are clearly interesting discussions to be had on AI, I’ve recently been reflecting on the game-changing role physical technology still has to play.

This may not be as topical as the new kid on the block – AI – but it remains as relevant as ever and, in my view, is here to stay.

The integration of physical technology into policies is usually intended to achieve one or more of the following aims:

Refining underwriting intelligence

A good and early example of physical technology helping to gather underwriting information is the vehicle black box.

Black boxes provide detailed information to insurers on key underwriting factors such as driving style, speed and vehicle usage.

Such information enables underwriters to make more informed decisions as to risk acceptance and pricing.

Used well, this can improve customer outcomes by enabling insurers to steer clear of high risk insureds while rewarding lower risk drivers with lower premiums.

Loss verification

In the event of a loss, physical technology can help verify losses and speed up the claims verification process.

The new Sky Protect policy is an example of this.

With Sky Protect, home insurance is coupled up with smart tech in the form of a video doorbell, indoor camera, leak detectors and motion and camera sensors.

These devices can be accessed through the Sky Protect App. In the event of a claim, customers can verify incidents by downloading footage from the devices and sending it to their claims handler.

Loss prevention or limitation

Technology can also be used to reduce the insurer’s and insured’s risk of suffering a loss – in theory creating a win-win scenario.

An example of this is the provision of early leak detection systems that identifies water leaks and cut off the water supply to the insured premises to minimise any damage.

Parametric claims processing

A parametric insurance policy is one which automatically pays out if certain predetermined criteria are met.

These are usually related to weather or geological events. Recent examples include a flood policy in New York that pays out if water levels exceed a certain amount and an earthquake policy in New Zealand that automatically pays out if seismological detection equipment records certain readings.

Such policies invariably involve the integration of insurance and technology, with the technology being used to determine whether the criteria for claims payments have been met.

The future

Notwithstanding the rush to incorporate AI into systems, in my view, there remains real untapped potential to incorporate existing reliable physical technology into insurance products to create a virtuous circle, whereby risk is reduced – to the benefit of insurers and insureds – and claims can be settled quicker.

I certainly don’t think we should write off the old kid on the block just yet.

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