State Farm's in-house innovator has visions of insurtech's future

July 6, 2023 6:58 AM

di-state-farm-hq-030817 — State Farm corporate headquarters in Bloomington, Illinois

Jim Ryan, innovation executive at State Farm, is tasked with bringing fresh ideas to life at a 101-year-old company.

Ryan joined the insurer in January, bringing three decades of experience as a wireless telecommunications industry executive. He worked for AT&T on the launch of Apple's iPhone, when it was the exclusive carrier. More recently, Ryan worked for early stage companies, including Sierra Wireless, on linking mobile commerce and IoT to telecom connections.

At State Farm, he's tasked with transforming the insurer's operations, including its auto insurance telematics BlueOwl and HiRoad subsidiaries. Ryan sees the future of technology in the insurance industry as a transformation from insuring against losses to ensuring good outcomes.

Digital Insurance spoke with Ryan about State Farm's efforts to innovate in insurtech, how the partnership approach he had in telecom is useful, and the insurer's future plans.

This interview has been edited for clarity.

On innovation, how does the insurance industry differ from telecom?

Jim Ryan - State Farm -BW.jpg — Jim Ryan, innovation executive, State Farm.

State Farm is a 100-plus-year-old company. It's a business model that hasn't fundamentally changed during that time. If something goes wrong, then I can financially get you back on your feet. It's been the basic premise of the business for a very long time. The businesses I come from aren't more than 20 years old.

For the insurance industry, an existing business going through transformation is a very different thing. It's getting to understand the deep legacy of relationships, products, services and capabilities that are an existing business, and how important and vital those are. And how do you evolve those to be a new business, versus just breaking everything? You need to grow from where you are to where you're going, not just merely start something new.

You’ve spoken about going from ‘insuring’ to ‘ensuring.’ What are the challenges to that?

This is going to happen in a number of stages that are pretty logical and sequential. In auto insurance, we've gone from a time when we didn't understand much of what was going on. We would look at some historical data, some third-party data and say you were worthy of insurance, and we'd insure you. Then if you got into an accident, we'd say, you're not a good risk — suddenly raising your rates, because we didn't have levers to work with.

Today, we're moving towards a place where the vehicle's connected, the individual is connected, the data is more real time, and the contextual data is more available. We're right at the early stages of being able to understand and use that to help price risk. Now we understand what's happening in the car, and the next step is for the car to understand what's happening in the car, and the car to actually start taking over some of those functions — for assisted driving capabilities to advance.

Take that even a step further. When the car is driving itself, it's more about a warranty than about insurance. There is a very logical evolution to this that as the capabilities improve, as the systems improve, that the dynamic of that relationship with the policyholder evolves. You then start becoming an entity that can help them and ensure that they're doing the right things, and they're in the right place, that their vehicle is working the way it's supposed to work, to help them not have that accident, to not have that problem.

The evolution of that trust is the evolution of participating in insurance, to say the more that I'm able to help you, the more that you're able to give me access to that information and insight so that I can be helpful to you, the more I'm a participant in that assistance. There really aren't many other entities out there that can actually play that role in the ecosystem.

Where do you find ideas for innovations for State Farm?

For many years, State Farm ran BlueOwl and HiRoad as independent startups, cultivating an innovator's mentality. Their teams generated a tremendous amount of capabilities, ideas and insights. Also, State Farm's Research and Innovation Laboratory led by Haden Kirkpatrick (formerly of Esurance) has the job of coming up with the next new thing. We've got some of the smartest minds working on quantum computing, on deep AI capabilities, and on metaverse.

State Farm is visionary enough to fund projects and to put teams out there that say, go look at that, go figure out how we play in the metaverse. Go figure out what quantum computing is going to mean to the insurance industry in 10 years. They spend the time and the energy.

In auto insurance, what telematics and UBI innovations is State Farm developing?

Across State Farm, we have our Drive Safe & Save application, which is discounted based upon safe driving. We're looking to continue to make that more contextual and more valuable to our consumers, as we have more data and as we have more ability to utilize that in ways that help explain and educate and enhance and improve their driving experience. We take that even a step further within HiRoad, and we do it much more real time. And then we will use HiRoad as a means to continue to really push the envelope on what's possible.

Automated driving assistant services (ADASs) are coming out. They're not all the same. Some are better than others. Imagine the world in the not too distant future where we know you have an ADAS system. We know that if it's engaged, that you reduce the risk of accidents. We know you're going to engage it for the next two hours on your journey. During that two hours on your journey, you're not the same insurance risk. So you should be rewarded for that. We're talking to the original equipment manufacturers about ways to incentivize and reward and build that new way of thinking.

What does an ‘ensured’ world look like – as opposed to the ‘insured’ world?

It's a world where stuff doesn't happen, where you have a level of safety and security, where accidents really are exceptions. That is a place of security and safety and comfort. It seems inevitable that will happen. It's just when it will happen and how do we get there? How do we get there faster? There's no technical reason not to be able to eliminate many of these issues. We have to create the context, create the environment, create the capabilities to eliminate a lot of these problems, and we can all enjoy much happier, healthier, safer lives. A lot of things that go wrong are things that could have been prevented with a bit of forethought.

The amount of information insight we have today, versus what we will have even five years, 10 years from now is infinitesimally small. The context that will be available to us, and that's becoming available to us, and that the compute power to turn that data into information insight is going to be staggering. Directing that appropriately, I think is the battle.

Will capabilities be used appropriately? Because there are people who look at this and say it's a life-changing, money-making opportunity to treat people as a means to an end, to continue and perpetuate some of the existing business models that have carried the digital space for the past 20 years. That is dangerous. If we're not careful, if we don't give a proper home for this data and a proper level of sovereignty control to the individual, that's the future we're resigning ourselves to if we don't fix this problem.

These are big questions. It's a good thing we're a big company with a lot of capital and a lot of time to go fix it.