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

What telematics can teach us

Matteo Carbone

@mcIns_

A perspective from the Italian 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 2Telematics Strategy 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

InsurTechInfluencer

• Speaker and writer on insurance innovation

• Insurance Thought Leader

• InsurTech Influencer

Founder of Connected Insurance Observatory

• Responsible of the Connected Insurance Observatory, the global think tank focused on the insurance IoT

• Advisor of more than 60 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 3Telematics Strategy v1

Connected insurance: what is in it for insurers?

Improve insurance profit & loss through

specialization and setup of partnerships

Enhance proximity and interaction frequency

with the customer while creating new customer

experience and offering additional services

Create and consolidate knowledge about the

risks and the customer base

Frequency of

interaction

Benefits on the

insurance

bottom line

Knowledge

creation

1

2

3

Source: Connected Insurance Observatory , Bain & Company

Perform a new virtuous role for society by

providing positive externalities for a

sustainable society

Sustainability4

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 4Telematics Strategy v1

The Gen C (Connected Generation) is ready!If you are not, someone else will satisfy them

"How likely would you be willing to agree to have a black box fitted in your car or a driving app on your smartphone that would track position and driving behaviors in order to receive services and a discount on your auto insurance premium?"

Source: Connected Insurance Observatory, Bain & Company, SSI

BIG CUSTOMERS BASE AROUND THE WORLD WILLING TO USE TELEMATICS

INSURTECH TELEMATICS START UPS GAINING SPEED

• Metromile is a variably-priced, pay-per-mile car insurance provider

• Last investment round ($191M) will be used to acquire Mosaic Insurance – first insurtech start-up to acquire insurance incumbent

• NAUTO uses cameras, motion sensors and GPS systems, as well as artificial intelligence software, to detect what’s happening on the road, as well as inside a car

• Big-name auto and insurance companies BMW, Toyota and Allianz Group invested in the start-up and entered into data-sharing partnerships

MOTOR BUSINESS

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 5Telematics Strategy v1

How many connected car insurance policies out there?

2012

2015

ITALY US UK

4,8 M connectedcars on'15

3,3 M connectedcars on'15

0,6 M connectedcars on'15

Source: Connected Insurance Observatory estimates

Leave-in

Roll-over

MOTOR BUSINESS

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 6Telematics Strategy v1

Insurers adopted a mass market telematics approach in Italy

Customer Age Premium level Device Pricing approach

The market evolution was characterized by multiple solutions targeting different customer segments

Source: Connected Insurance Observatory, ANIA, IVASS

Telematics penetration Telematics insurance contracts, M Telematics insurance contracts, M

MTPL premium paid

>€900

€600-€900

€500-€600

€400-€500

<€400

Insurance products, #

Policyholder age

Premium adjustment on current year

based on behaviors

Flat discount

Flat discount + renewal price

based on behaviors

MOTOR BUSINESS

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 7Telematics Strategy v1

Insurer achieved relevant benefits to your bottom line, telematics is not (only) for pricing

Source: Connected Insurance Observatory, Bain & Company

Traditionalbottom line

Risk selfselection

Claims costreduction

Service fees paid by the customer

Potential to charge yearly service fees to the customers (50-100€ charged to the

client)

Bottom linewith telematics

Hardware

TSP

Telematicscosts

Discount to customer

Benefitsretrocession

Intermediary additional

remuneration

Telematics portfolio shows 18% lower incidence of

body injury, -11% repairing cost reduction

and higher level of preferred body shop

usage than non-telematics portfolio

Telematics portfolio shows 20% less

claim frequency risk-adjusted than non-telematics portfolio

MOTOR BUSINESS

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 8Telematics Strategy v1

LOSSCONTROL

+100%Insurer's body shops

usage

BOX

-11% material damage costs

Source: Bain, Connected Insurance Observatory

Real time, fact based and digital claims handling

-18% body injuries incidence

TELEMATICSBEST PRACTICES

MOTOR BUSINESS

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 9Telematics Strategy v1

9

To achieve those results you need to innovate your claims processes

•Crash detection real time, FNOL anticipation, guiding the client towards the preferred auto repair center

•Structured set of objective data about crash dynamics, anti fraud, improved accuracy of the loss costs prediction

Loss prevention

•…from pay to care

MOTOR BUSINESS

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 10Telematics Strategy v1

Opportunity to reinvent the claims customer experience

During driving Crash Parked

Source: Connected Insurance Observatory , Bain & Company

Claim certification at customer's

disposal

Customer assistance and

personalized case management in case

of crash

9

Automatic assistance to the customer on the

premises in case of severe accident

10

Simplified claim notification, including automatic form fill-in based on telematics

data

1112

Short-time theft

cover

Parking localiza-

tion

1415Alert in case the

vehicle is moved when the engine

is off (e.g.two-away)

16Alert if the car is hit

when parked

17Alert if there is the device stop transmit

data

18

Antitheft service if the box is removed/ uninstalled

Bodyguard for emergency outside

the car when parked

19

20

Stolen vehicle recovery

21

Street sweeping

alerts

13

Fuel gas predictor

Weather alert based on geo-

localization

Antitheft service if the box registers a different-than-

usual driving style

"Live" Concierge supporting navigation

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

"unsafe area") of the city, defined by the customer (e.g.

parental control options)

Alert in case speed limits are

exceeded

5

314

2

Highway/ parking area tolling

Road or medical assistance via

dedicated button

6

8

7

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 11Telematics Strategy 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

Barriers to the telematics development

Surce: Connceted Insurance Observatory

Costs

Data managementcomplexity

Privacy

Lack of a clearstrategy

11%

34%

22%

34%

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 12Telematics Strategy v1

Connected Insurance is about connecting the insurer with his customers and their risks

Set strategic goals/ ambition for the introduction of connected insurance

Connected insurance approach

• User experience

• Pricing approach

• Services

• Loyalty systems and "behavior steering"

• Hardware and data gathering approach

• Make vs buy decisions

• Enablers (process and tools)

• Effectiveness and readiness of organization

• Implementation and continuous improvement

A

B

C

“Connected insurance is a journey, not a destination”

TELEMATICS

STRATEGY

VALUE

PROPOSITION

EMBEDDING CONNECTED

INSURANCE IN THE ORGANIZATION

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 13Telematics Strategy v1

It is more than choose an hardwareC

THE VALUE CHAIN

• User experience

- Customer user experience

- Connected Insurance ecosystem

- Based on data collected, offering of additional value-added services to user

• Insurance smart actions

- Insurer's "on air" actions such as billing, claims management, cross selling

• Insurance advance analytics

- Insurer's "batch" knowledge creation (risk models, claims knowledge, …) based on the granular data analysis

• Data analysis/preparation for insurance needs

- Analysis, interpretation and preparation of collected telematics raw data for insurance purposes (e.g. algorithms reconstructing crash dynamic)

• IoT data collection and data sources management .

- Collection of recorded data from front-end device and transmission of raw data to TSP, e.g. cloud

• Sensors design/ manufacturing

- Manufacturing of various front-end devices such as black box devices, OBD dongles, tags and apps

User experience (UX)

Sensors design/ manufacturing

IoT data collectionand data sources management .

Data analysis/preparation forinsurance needs

3

66

5b

4

3

2

1

2

1

5a

Insuranceadvance analytics

4

Connected insurance

ecosystem (VAS)

5bInsurance

smart actions

5a

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 14Telematics Strategy v1

The Connected Insurance Observatory helps his members to play with the Insurance IoT innovation

Objectives

Scouting and rationalizing qualitative/quantitative knowledge

on Connected Insurance

Sharing a critical point of view of key trends and

spreading innovation culture

Encouraging stakeholders discuss experiences and exchange ideas

about innovation

The scopeAny insurance solution based

on sensors for collecting data on the state of an insured risk

and telematics for remote transmission and management of the data collected

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 15Telematics Strategy v1

The 2016 European Connected Insurance Observatory in a nutshell

Insurance GroupsInvolved hundreds of executives

from more from 26 Insurers both at local level (Italian branch) and

at European Group Level

26Institutions and Partners

Selected list of heterogeneous partners contributing to the insurance discussion about innovation with different angles

18

Plenary meetings3 full days of keynote speeches,

discussions, roundtable. A terrific networking opportunity

3Hours of workshop

More than 130 "one to one" workshops (2-3 meeting dedicated to each company joined the Observatory)

280

5

Business insurance lines addressedUnique research based on innovation thought leadership and insurance acumen on all the insurance business lines

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 16Telematics Strategy v1

The 2016 European Observatory edition put together an impressive line of leading players

• Generali Group and Europe Assistance

• Axa Group

• Zurich Group

• Allianz Global Assistance

• Reale Group

• Gruppo Poste Vita

• Groupama

• Gruppo Cattolica

• Sara

• Credit Agricole Assurance

• Helvetia

• HDI

• IMA Assistance

• Swiss Re

• Munich Re

• Scor

• RGA

• Cardif

• Chubb

• Ageas

• Avipop

• Filo Diretto

• ITAS

• RBM Salute

• La Parisienne

• AIOI NISSAY DOWA

• Italian National Association of Insurers(ANIA)

• Guidewire

• SSI

• DigitalTech International

• Sysdata

• Neosurance

• Portolano Cavallo

• Venture Scanner

• InfoBlu

• Italian National Association of Brokers (AIBA)

• Appian

• Octo Telematics

• Vodafone Automotive

• Aubay

• Eumetra Monterosa

• IRSA

• LoJack

• InsurTech News

Institutions and PartnersInsurance Groups

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 17Telematics Strategy v1

Since the beginning of 2017, we will start also the North American Connected Insurance Observatory

The two Observatories together will create an impressive opportunity tocross-fertilize the insurance innovation thoughts across geographies

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@connectedinsuranceobservatory.com

+393346220378

@MCins_

Thank you