Insurance companies are working tirelessly to transform a once stagnant industry. As such, carriers are exploring several avenues to spur innovation, including the launch of in-house labs intended to leverage new technologies and optimize policy distribution, claims and underwriting.
These labs have grown in stature in recent years, helping carriers create viable areas of expertise in specific technology verticals, such as data science, mobility and the Internet of Things, as they build out capabilities addressing core business problems. An industry-wide push to meet new consumer standards, set by the likes of Amazon and Google, has also introduced insurers to new forms of data that complement the loads of historical information already in their possession.
When Sears Merritt first took over as head of MassMutual’s data science program in 2013, he spent the majority of his first year building up the insurer’s data science profile, which was nonexistent, he says. The company went on to open its physical lab in August 2014, and now sports 80 data scientists on staff — divided into senior, middle and junior level roles.
In September 2015, MassMutual also finished construction on a new 5,000-square-foot facility in Amherst, MA, where its data science team operates from today. Employed technologists’ knowledge spans a variety of different educational backgrounds, Merritt says, including computer science, statistics, economics and physics.
In order to fill necessary talent gaps early on, MassMutual partnered with five local universities — Smith College, Mount Holyoke, UMass-Amherst, Amherst College and Hampshire College — to create a data science development program. Each year, the company takes five to seven accepted applicants fresh out of college and splits their time up between taking data science courses and working on company projects. All classes and faculty are paid for by the insurer.
“We wanted a way to grow talented junior-level science individuals into mid-level roles within two to three years, and senior roles in about 10,” says Merritt. “Some applicants even choose to go forward and get their Master’s degree.”
The regional insurance carrier also has additional partnerships with Mount Holyoke College and Smith College for its MassMutual Women in Data Science program. The $2 million, four-year curriculum began at both schools in 2015. It’s also pledged $500,000 to the University of Vermont’s Complex Systems Center for a data science Ph.D. program.
MassMutual’s overarching goal is to leverage data science for customer experience optimization. Algorithms built in house are crafted to match consumers up with products and services they want, and how they want it delivered, according to Merritt.
In regards to partnering with outside insurtechs, MassMutual’s data science lab only gets involved if the company’s venture-capital arm, MassMutual Ventures, finds startups specializing in their domain.
“We help evaluate them,” says Merritt, adding that the company has no preference in where innovation comes from. “If data exists on an industrious scale, and we don’t have the time to collect and curate the information a startup already has, that’s a partnership opportunity. But some problems are fixed best by incumbents because we have data they can’t have.”
The company’s investment in data science is paying off with a newly launched subsidiary, LifeScore Labs, which offers FICO-like life-insurance underwriting risk scores. The initiative was derived from major successes on bigger data science initiatives around risk modeling, says Merritt. Consumers can take results generated from up to 48 different standard underwriting inputs to any carrier for a quote.
“We’ve been working on mortality risk scores over the last few years, and have developed algorithms for them,” Merritt says. “We realized that the industry and consumers could benefit from a platform like this, if it was transparent.”
A macro focus at Liberty Mutual
The evolution of innovation labs can be best depicted by insurers’ growing focus on making consumers’ daily lives easier. In the last six months, Liberty Mutual’s innovation center, Solaria Labs, has leveraged third-party data to deploy several new products for consumers in response to developments in the sharing economy, smart home and autonomous vehicles.
Established in 2015, Solaria Labs is treated as a part of a larger innovation ecosystem that includes the insurer’s core business and partner network, including startups and original-equipment manufacturers. The lab has two locations: one minutes from Liberty Mutual’s Boston headquarters and the other in Singapore, launched last summer.
Despite the disparity in markets, the labs are identical in workflow, Adam L’Italien, VP of global consumer markets innovation at Liberty Mutual says. Each begins by ensuring pitched offerings by product owners, operating as mini CEOs, have a consumer focus. These owners are also responsible for testing their ideas in market and understanding what features need to be built on. Meanwhile, Solaria’s applied science team is tasked with developing algorithms needed for the projects. Software developers and designers then build out the functionality for apps and online solutions.
Total Home Score, launched in October, is one consumer-focused product born out of Solaria Labs. The offering uses a customized Shine API to get a clearer picture of residential neighborhoods through 3-D maps, rating road safety and noise levels around homes consumers may want to purchase. The platform’s Road Score service also measures the prevalence of aggressive driving in selected areas, while the Quiet Score estimates the noise levels surrounding a home due to traffic or public transportation.
The insurer plans to use the same publicly available data used for Total Home Score to expand the use of Solaria Labs’ API and deploy an auto offering in the near future, according to L’Italien. The envisioned product would offer a “safe route” for drivers to follow, in addition to the quickest route or toll avoiding options provided by traditional GPS systems.
In January, the innovation lab also launched Dwellbeing, designed to help homeowners maintain the infrastructure of their property. The platform offers a customized website where users can manage heating, ventilation and air conditioning systems; plumbing; common house appliances; and home safety gadgets. The technology relies on self-reported information from customers to work, but automatically sends mobile notifications to homeowners when maintenance tasks are required.
“Instead of just focusing on disruptive forces, and studying them, we wanted to proactively extend protections beyond insurance,” says L’Italien, who leads Solaria Labs’ efforts along with lab manager Chris Moss. “Now that we have all this knowledge and expertise, we are thinking about how take action to protect people in new ways, including their experiences.”
