Disrupting Insurance: The internet of things

There are a lot of buzzwords circling around lately like “The Internet of Things” and “Big Data”.  The trouble is that many don’t really understand how it all works.  The insurance industry seems jazzed up about big data and the need for data scientists.  The question that is rarely spoken however, where is all that data going to come from?

In an earlier post we spoke of the coming tech disruption of insurance and gave the example of Metromile, a company offering pay-per-mile driving insurance.  We hinted at the idea that “given the right data, one could readily track your driving style to understand your risk profile in a much more intimate way”.  If you can readily identify the risk profile of your drivers, you can more accurately adapt your rates and your costs to it.  This is where The Internet of Things and Big Data come in.  How do you collect that data, parse it and analyse it to be able to make decisions based upon it?

Let’s start with a sample business case.  You decide you want to write insurance for logistics firms.  As a means to undercut your competition you decide to leverage technology in the form of in car analytics.  You have the grand idea that if you could readily track details about drivers and their trucks you could analyze them to understand their risk profiles and have a better idea of the risks of the business. This allows you to cut your premiums as well as your costs because you can readily identify deal with problem drivers or problem vehicles.  The idea part is easy, the question is, how do you do it?

Metromile is using a phone app.  That’s a great place to start.  Going further would be to tap into the standardized on-board diagnostics (OBD) port available in most every car and truck these days.  It is what mechanics use to diagnose problems with your car.  The technology around this is maturing as there are a growing range of products and apps which leverage this port to allow you to track many data points like car health and the way the car operates.  Combined with the right electronics and the right applications one could readily build a very comprehensive data profile of both the state of the driver and that of the car.  The implications are profound as suddenly you can have keen insights into the risk of insuring our sample case of a fleet of logistics drivers.  The problem is collecting and analyzing that amount of data isn’t exactly trivial.

The idea seems simple, the diagnostics app and device is the “Thing” and somehow you need to connect it to the internet.  This “connect it to the internet” bit of plumbing is what few people talk about.  How do you collect information from thousands or even millions of devices that could all communicate at random times, possibly all at once?  This is the big missing gap that we’re getting closer to crossing.  On-demand or “Cloud” computing is making it easier to build cost effective, scalable, cloud based, software architectures that are able to process incredible amounts of data.  This is why people in the tech community are jazzed up about the internet of things, we’re getting very close to the tipping point where we can actually build these sorts of solutions.


Diversify how exactly?

The PLP’s regularly purported solution to our economic woes is that we must diversify our economy.  Shadow Finance Minister David Burt is back in the paper suggesting dismay at the lack of focus in the budget towards such efforts.

“For going on three years now, the OBA has refused to diversify the economy, shown a lack of vision for the future of this country, and now the people of this country are going to be made to pay for their lack of action on economic diversification and economic growth with increased taxes, which will cause increased pain,” he said.

The trouble is that they offer pie in the sky suggestions like we should “invest in FinTech”.  If the most overused play in the OBA’s playbook is to try to solve every problem in isolation, the PLP’s would be to throw money at every problem.  This is why we’re massively in debt.  Every problem had massive amounts of money thrown at it and in most every case we didn’t get reasonable return on investment.

If Bermuda really wants to diversify its economy and give rise to innovation the government has to do everything it can to GET OUT OF THE WAY (if I could emphasize that more I would).  It is very important to understand that we became a leader in insurance because we created a streamlined regulatory environment.  That is what is required to create new industries.  Top venture capitalist Marc Andreessen covered it incredibly well in “What it will take to create the next great silicon valleys, plural”.

We have to have a government dedicated to streamlining the regulatory environment for startups to thrive.  We don’t need to throw money at it.  The right regulatory environment will attract money.  It will also attract talent.  We have to create the right regulatory environment and then make it incredibly easy for money and talent to come to the island.  That’s it.  If we do that, we’ll increase money flows to the island, boost the local economy and create jobs for Bermudians.

Budget disappointment

The OBA has taken the easy route, increase taxes and the burden on local businesses.  It is disappointing to say the least.  It is kicking the can down the road.  Eventually we will have to deal with the disproportionate size of the civil service, likely we’ll be forced to.

First thoughts on the budget

Customs Duties will be simplified. Mr. Richards said: “The simpler the rules are, the fewer man-hours needed to oversee and enforce them, making the system more efficient.

“The Customs Tariff has become complicated and confusing to administer over the years. The tax reform plan will therefore seek to simplify it and other revenue-raising regulations to make them efficient and user friendly.”

Finally.  Get rid of the insane 460+ page list of tariffs.  Go all the way and replace the vast majority of it with a flat rate.  Split any proceeds beyond the norm between paying down the debt and a basic universal income to offset the tax increases for the poorer elements of society.

Ivory tower politicans

The big problem facing the One Bermuda Alliance is that they’ve become ivory tower politicians.  They mean well, but they’re horribly out of touch with the average Bermudian.  There is a strong disconnect between the vision they campaigned under and their governance.   They too often act like they won by a landslide when they barely scraped by with a majority.

“This Government was elected with a mandate to solve Bermuda’s very serious challenges”.  – Attorney-General Trevor Moniz

The problem with our two party system is that parties act like they’re ordained with the right to govern as they see fit.  That we willingly elected benevolent dictators to herd us like the sheep we are.  It just doesn’t work like that anymore.  The world is too connected.  Times have changed.  People expected different.

Political Power belongs to the people. We will work for the benefit of all. We will be a public service government, putting you first.

That is a direct quote from the OBA’s election platform.  Does it sound like our current government?  Really, go through and reread their platform and consider how similar it and our current government are.

The OBA’s message was that they were something new, something different.  They were the “One Bermuda Alliance”, an alliance of individuals pursuing a common vision of a Bermuda working together as one.  They were to be collaborative, involving the people and all stakeholders in decisions.  Does that sound like our current government?

Instead, they’ve got things backwards.  Here is an example of the most used play from their playbook.

  1. Try to figure out the “right thing to do”
  2. Come up with a plan or legislation in isolation
  3. Announce the plan
  4. “Educate” the people on the plan
  5. Force through the plan or abandon it if there is too much backlash

Over and over this play keeps backfiring.  For some decisions, we need leaders who can make a judgement call, go against popular opinion and stand by it without asking for feedback.  For others, the people and all relevant stakeholders need to be involved in the decision making process.  Making a judgement call and then backtracking and pandering to the public about it is like trying to make two wrongs a right.  Either it needs to be done or it should be a collaborative effort.

Given the OBA’s campaign it was hoped that the most used play in their playbook would be

  1. Identify the problem
  2. Educate people on the problem
  3. Invite suggestions for solutions
  4. Collaborate with stakeholders on a handful of options
  5. Educate people on the options including their benefits and drawbacks
  6. Put those options to a referendum

Is that an exceedingly slow way to govern?  Absolutely.  Not every decision can or should be made in this manner.  However, for issues like immigration reform, what really was the rush?  Why was a more collaborative approach not undertaken?  Why does it feel like even if you agree with the reform that its being shoved down your throat?

This is why more and more people are dismayed with the OBA and suggesting they’re out of touch.  They campaigned under the vision of being the party that involves the people and puts the people first.  Unfortunately, they seem to spend far too much time in their ivory tower trying to solve all of Bermuda’s problems in isolation.  Their “mandate” was to be a party that was new and different.  Sadly they seem to be tracing the same steps as all who came before them.