This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

Mass telematics adoption

Matteo Carbone

@mcIns_

Has anyone asked what the customer wants?

London, June 28

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 2 MIL

mass telematics adoption v1

The background of the thoughts I will share with you today

Principal @ Bain & Company

• Financial Service and Digital Practices

• 12 years strategic consulting experience

• Focused on insurance and innovation

Insurtech Influencer

• Speaker and writer on insurance innovation

• Insurance Thought Leader

• Top 50 InsurTech Influencer

Founder of Connected Insurance

Observatory

• Responsible of the Observatory on Telematics, Connected Insurance and Innovation

• Advisor of more than 50 international players on Insurance IoT

50

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 3 MIL

mass telematics adoption v1

I founded a think thank focused on Insurance IoT

Insurers

30 Insurers part of Insurance Groups representing 66% of

the P&C Italian insurance market

Reisurers

3 primary International Reinsures30 3

Aiba Appian Aubay DigitalTechBelron Guidewire

IRSA SYSDATAPortolano Cavallo

Studio legale

Vodafone AutomotiveInfoblu Octo Telematics

More than 45 players joined the first edition of the Observatory

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 4 MIL

mass telematics adoption v1

Customers More than 4 Millions of

Italians have an insurance black boxes

fitted in the cars

+4 Penetration Telematics represent 16% of the auto insurance contracts sold and renewed at Q4 '15

16%

Best practice One of the main Italian

insurance Groups reached a penetration greater than 40% on

his auto insurance portfolio

>40%

Source: Bain estimations based on "Observatory on telematics, connected insurance & innovation" data

Insurers 26 Insurers are offering a motor third part liability cover telematics based on the Italian market

26

Car insurance telematics is already mainstream in Italy

65% NOW!

65% of the Insurers at the Connected Insurance Observatory have already seen a material impact of telematics on the Italian auto insurance market

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 5 MIL

mass telematics adoption v1

Consumers aren't concerned of data security

Source: Bain elaboration on "RCA e black box: analisi degli acquirenti", Sergio Desantis. Connected Insurance Observatory

Telematics penetration

Age

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 6 MIL

mass telematics adoption v1

Source: Bain elaboration on "Clausole sulla Black-Box: trend temporali e canali di selezione/controllo dei rischi", Marco Cosconati. Connected Insurance Observatory

Telematics penetration

MTPL premium level(€) Mln cars

Consumers aren't concerned of data security

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 7 MIL

mass telematics adoption v1

Consumers decide what happens to their data, but they are interested to save on car insurance

MTPL + theft (discounted) + black box

MTPL (discounted) + black box

When the increase of value is positive and material, there is an

effective use case for the client and a selling speech for the distributor

Surce: Connceted Insurance Observatory

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 8 MIL

mass telematics adoption v1

OUTSOURCING

POSITIVE

IMPACT OF

TELEMATICS

ON BOTTOM

LINE

• Ability of box to:

- auto-select risks

- Lower the theft

• Efficiency of information usage in the claims handling process (based on claims detection and claims reconstruction)

•Usage of TSPs allowed to:

- achieve relevant quick wins with limited investments and limited impact on the system

- have direct access to innovation

• Effectiveness of the commercial act which is maximized by:

- Visual effect of the reach of the RCA discount

- Explicit fees paid by the client

• Remuneration to the intermediaries

The telematics data usage creates concrete value on the insurance value chain

Traditionallifetimevalue

Benefits forinsurance

bottom line

Services & assistance

rate

Customerdiscount

TSP

Lifetimevalue

telematics

CompanyLTV

• Distributor

Telematics business case

1

1

2

3

5

2

3 5

4 4

Intermediary

INTERMEDIARY

COMMITMENT

Business case based on value sharing both with the clients and the intermediaries

Additional fees

Surce: Connceted Insurance Observatory

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 9 MIL

mass telematics adoption v1

Telematics benefits on the insurance bottom line

RISK SELECTIONMTPL claims frequency

-20%

Surce: Connceted Insurance Observatory

LOSSCONTROL

-11% material damage costs

-18% body injuries incidence

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 10 MIL

mass telematics adoption v1

Partnership with third parties allow the creation of a wide spectrum of services telematics based

Source: Bain Observatory on Telematics, Connected Insurance & Innovation

Weather alert based on geo-localization

5

Antitheft service if the box registers a different-than-usual driving

style

3

"Live" concierge supporting navigation

1

Alert if the vehicle exits a "safe area" (or enters an

"unsafe area") of the city, defined by the client

(e.g. parental control options)

4

Alert in case speed limits are

exceeded

2

Highway/ parking area tolling

6

While driving

In case of crash

When parked

Road or medical

assistance via dedicated button

7

Simplified claim notification,

including automatic form fill-

in based on telematics data

8

Damages Photo

Claims feature

Claim certification

at client's disposal

Automatic assistance to the client on

the premises in case of severe

accident 9

10

11

Client assistance and personalized

case management in case of crash

Parking localization

Street sweeping

alerts

Alert if the car is hit when

parked

Antitheft service if the box is removed/

uninstalled

Alert in case the vehicle is moved when the

engine is off (e.g.

tow-away)

14

15 16

13 12

Stolen veicle recovery

17

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 11 MIL

mass telematics adoption v1

Ecosystem of partners to create engaging touchpoints and sustainable business cases

Economics auto telematics

Traditional lifetime value

Partners contribu-

tions

Discounts/cash back to the client

Fee for ecosystem of partners Fee for the intermediary

Lifetime

value

telematics

LTV for the Company

Benefits on the

insurance bottom line

Additional fees

Weather alert based on geo-localization

5

Antitheft service if the box registers a different-than-usual driving

style

3

"Live" concierge supporting navigation

1

Alert if the vehicle exits a "safe area" (or enters an

"unsafe area") of the city, defined by the client

(e.g. parental control options)

4

Alert in case speed limits are

exceeded

2

Highway/ parking area tolling

6

Road or medical

assistance via dedicated button

7

Simplified claim notification,

including automatic form fill-in based

on telematics data

8

Damages Photo

Claims feature

Claim certification

at client's disposal

Automatic assistance to the client on

the premises in case of severe

accident9

10

11

Client assistance and personalized

case management in case of crash

Parking localization

Street sweeping

alerts

Alert if the car is hit when

parked

Antitheft service if the box is removed/ uninstalled

Alert in case the vehicle is moved when the

engine is off (e.g.

tow-away)

14

1516

1312

Stolen vehicle

recovery

17

The insurer can keep more value with use cases based on a broad suite of services and rewards

Surce: Connceted Insurance Observatory

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 12 MIL

mass telematics adoption v1

Connected insurance market adoption requires defined sequential steps

Surce: Connceted Insurance Observatory

Incubation phase

Growth phase

Maturity phase

Exploration phase

Learning phase

Which is the

best way to do it

for my

company?

Does the

approach make

sense?

There is a

ROI of the

use case”?

• First pilots focused on pricing

• Roll out on few pioneers

• Pilot phases diffusion over the greatest part of players, by using a "me-too" approach

• Only few top players understand telematics full potential (UW, claims, VAS), define their own approach (eg: big data) and push the selling phase

• Commercial offer differentiation

• Telematics potential fully understood and increased commercial push by all players

• Differentiating solutions / providers over top players

• Telematics approach is the standard for the auto insurance business

• Relationship consolidation between top players and providers, best practices cross-country diffusion

DE FR SPACAN US

ITA

UK ZA

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 13 MIL

mass telematics adoption v1

The lack of a clear strategy limit the achievement of the full potential of the telematics

4

5 TelematicsValue

Creation

Loyalty and "behaviors

modification"

Loss Control

Risk-Based Pricing

Value-Added Services

Risk selection

1

2

3

Costs

Data management complexity

Privacy

Lack of a clear strategy

Barriers to the telematics development

11%

34%

22%

34%

Surce: Connceted Insurance Observatory

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 14 MIL

mass telematics adoption v1

Telematics is a journey, not a destination

Connected Insurance strategy

Value proposition

What strategic goal to achieve by introducing connected insurance?

How to position the product within the current product offer? What target client to reach?

Hardware and

operating model

• Which user experience at sales point?

• What pricing approach to introduce at underwriting and

renewal?

• What services and loyalty systems to include in the product?

• How to leverage the communication channel with client?

• Which data and how structure the data gathering

approach?

• What devices and which delivery user experience?

• How to evolve processes to strengthen the effectiveness of the

impacted Company functions? (e.g. claims, actuarial, UW, …)

• How to capitalize on the cumulated experiences and activate a

path of continuous improvement?

Surce: Connceted Insurance Observatory

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

Matteo Carbone Matteo.carbone@bain.it

+393346220378

@MCins_

Matteo Carbone, 28 April 2016