Learn about the revolutionary solutions coming from Allstate
Allstate Insurance, an 86-year-old company that grew out of Sears & Roebuck, is at a pivotal moment with the new digital shift occurring with autonomous vehicles.
Since the first Allstate Insurance brokerage opened its doors inside of the flagship Sears & Roebuck store in Chicago in 1933, the company has grown to be a $36.5 billion dollar company offering auto, home, and renters insurance policies.
But with advances in technology, cars are becoming technically safer. Add the rise of the autonomous car to the mix and you have an auto insurance sector that’s predicted to shrink by 60% by the year 2040 according to KPMG’s 2016 research report, Marketplace of Change: Automobile Insurance in the Era of Autonomous Vehicles.
In fact, KPMG predicts a decline in accident frequency due to safer vehicles, and their insurance practice estimates an 80% potential reduction in accident frequency by 2040. At the same time, KPMG reports that insurance companies aren’t ready for this change and yet this new autonomous car market will dramatically affect an insurance company’s entire business, for better or for worse.
In this new autonomous world order, data takes center stage. With new cars equipped with sensors to monitor every aspect of the car — including driver behavior — insurance companies will need to be able to handle the tsunami of data that’s coming — and will continue to come — their way.
A technical awakening
The ability to gather, manage, and collate information from cars will be critical for insurance companies. Insurance companies underwrite driver risk based on a snapshot view across a standard set of factors like driving violations or miles driven. But what happens when this information comes in real time and is more comprehensive?
KPMG believes there will be ‘black box’ type of approach. That black box will contain data about the driving environment, the vehicle’s every movement, and the driver’s decisions while they are in the car.
This means that automobile insurance brokers like Allstate will need the technology infrastructure in order to handle this kind of data-rich environment to stay competitive and in the game.
For Allstate, this technology mindset started a decade ago in 2007 after the proliferation of online insurance brokers.
“In the mid-2000s, we thought we were safe from online trends in insurances,” said Opal Perry, Divisional CIO and VP of Technology and Strategic Ventures at Allstate. “We watched online insurance grow and grow and knew we had to do something, so the company purchased Esurance in 2011.”
After Esurance, Perry said the company had a true technological awakening. The first line of business for Allstate was to hire a CEO whose background was in tech, not insurance. Tom Wilson, a career technologist, joined AllState as CEO in 2007 and from his first day he emphasized investment in cutting-edge innovation for the company.
The company created space in their business strategy for innovation and put into motion a technology culture that could develop services and products quickly and at the same time deliver business solutions that work for the company.
“We were this iconic American Fortune 500 company with eighty years under our belt and yet we turned to a startup for help.” — Opal Perry, Allstate
In part due to his background, Wilson began looking for partners that could bring on new technologies that would help the company be ready for the autonomous revolution and fulfill his vision of a true digital transformation.
Allstate did what what many legacy companies had started to do at the time — they turned to a startup for help. Looking for someone to help them give their developers access to cloud resources and modern methodologies, Allstate chose Pivotal.
In 2011, Perry said the company had three areas they wanted to work on, from basic block and tackle on tech issues, bringing the business up to the technological level it should be, and putting into place technology-driven strategies — in other words, create differentiators in the technology that can respond to strategy which will drive the company to its goals.
“We were this iconic American Fortune 500 company with eighty years under our belt and yet we turned to a startup for help,” said Perry.
“Instead of outsourcing or working on a dumb organic terminal and bring people in to make something, we chose to work alongside Pivotal on what we wanted to get done and real challenges we were having with the incoming data,” adds Opal. “From day one, we were working on real solutions and products we wanted the customers to have because of how the Pivotal process works.”
All of that incoming data was the first technology issue Allstate wanted to address with Pivotal.
In 2012–13, the company was getting a massive amount of data points from sensors on cars. The sensors would report car and driver data back to the company. All of that incoming data needed to be handled internally and they needed the tech to enable that, but more importantly they needed their developers to learn how to make that happen internally.
Perry and her team are already in that headspace. In the spirit of innovation, the company created Allstate Northern Ireland which is a tech lab that develops and tests technology platforms for use inside of Allstate globally. Products like Drivewise, which is a mobile app for safe driving where drivers get rewarded for smart driving, was developed in that lab.
The company also created a whole new entity called Arity, a connected car company that collects driver data and helps develop tools for assessing driver risk. Arity is hardcore data science and turns all of that data from more than one million drivers with a collective 20 billion miles from the Drivewise app into something predictable that can be sold to other companies in the automobile ecosystem like manufacturers, other insurance providers, or transportation companies.
“You don’t think technology when you think insurance, but we’re using a completely new set of tools to make things very real for all our customers,” adds Perry.
The implications of autonomous driving for the insurance industry are predicted to have the biggest impact on the industry since its inception nearly a century ago.
And nothing puts KPMG’s predictions to the test more than Allstate. Eighty-six years ago, Sears & Roebuck backed Allstate, and today, Allstate is backing their own spin-out, Arity. Both of those events — despite being eight decades apart — still have one thing in common: the automobile.
Change is the only constant, so individuals, institutions, and businesses must be Built to Adapt. At Pivotal, we believe change should be expected, embraced, and incorporated continuously through development and innovation, because good software is never finished.
How to Pivot When You’re an 86-Year-Old Insurance Company was originally published in Built to Adapt on Medium, where people are continuing the conversation by highlighting and responding to this story.