After the news that insurtech patent filings increased by 40% in 2017 from the previous year and 116% since 2013, insurance companies tell Patent Strategy that their patent filings will continue to go up as they invest more in insurance-related innovations to improve customer processes.
In-house counsel at Allstate, The Hartford and another insurance company say that the rise of consumer-focused technology has changed the expectations of insurance customers, who now want a more efficient and accurate service for less money.
In response, large insurance companies are developing more solutions that will make it easier for customers to buy cover and file for claims online with different internet-enabled devices, which they will increasingly seek to protect through the patent system.
“With the realisation that insurance companies must evolve and use technology to make that evolution happen comes the development of hardware, software, sensors and cloud computing innovations,” says Courtney Welton, senior vice president of innovation at Allstate in the US.
“We now have industry evolution happening at the same time as changing customer demand and innovation development, which makes it right for IP and patents to play a big role in our organisation.
“I expect our filings and those of other insurance companies to increase, although I cannot give specific numbers,” she adds.
Cedric Delacruz, assistant general counsel at The Hartford in the US, agrees that insurtech filings will increase, particularly as their tech-focused corporate customers continue to innovate in their fields and increasingly want to see their suppliers doing the same.
“The increase in filings has generally been driven by the focus on technologies such as handheld devices, the internet of things and artificial intelligence, and the companies and customers we work with that have demanded those technologies and tech-enabled services,” he says.
He adds that The Hartford has been active in applying emerging technology areas to the insurance market and looking for ways to streamline the entire supply chain from product distribution to underwriting and claims.
The business has a small business innovation centre, an internet of things (IoT) lab and has been acquiring smaller and specialised companies to help facilitate this customer-centric transition.
Research from London law firm RPC showed that some of the most frequent filers of insurance-related patents worldwide in 2017 included US insurers Allstate and State Farm, who filed 35 and 34 such patents respectively. The Hartford, Ping An Insurance of China and Swiss Re were also among the top filers.
What are they patenting?RPC’s research also showed that that insurance patents filed globally in 2017 were for innovations as diverse as use of a system that checks whether a self-driving car is operating autonomously and switches between insurance policies automatically, and a mobile app to speed up the claims process for people affected by natural disasters.
It also suggested that some of the main areas where innovations are being made in this space are telematics, pricing and artificial intelligence (AI).
Giving insight into these discoveries, Delacruz at The Hartford says that these are important areas for insurance companies to help drive their customer-focused strategies. IoT and sensor tech fall into the telematics category, which companies use for loss prevention and risk mitigation.
He adds that there is a lot of tech in the small and large commercial space that can help with those tasks. One big area of loss for commercial insurers is water-related damage, and The Hartford is looking at smart devices that can help predict and track the flow of water and leakages in commercial buildings.
“There are a lot of processes than IoT can be applied to,” he says. “If you look at the value chain from the underwriting or evaluation perspective, you can look at and do walkthroughs of a new restaurant or business.
“You can automate things that would have previously been done manually through video and sensor equipment that could detect potential conditions in the building, both at the initial underwriting stage and throughout the coverage period to help prevent the initial loss and give the first notification of loss,” he continues.
He adds that the right equipment can alert an insurance company and other relevant authorities of smoke, a fire or water leakage.
Welton at Allstate says her company is similarly investing in telematics, pricing and AI, and is focusing on solutions to create faster and easier ways for customers to purchase insurance online or insure themselves for peer-to-peer car-sharing services via their Allstate mobile apps.
For example, the company created an app called Drivewise that uses telematics to give personalised feedback on driving and gives customers access to discounts for good driving behaviour.
“This technology gives our customers something of value that is tangible and creates a good customer experience,” she says. “There are lots of ways to reach our customers, and about 99% of them involve technology.”
The senior counsel at a large insurance company adds that firms are sinking considerable R&D spending into drones that can survey damage on a house during a catastrophe, rather than having to send in a person to physically evaluate a claim. Use of this technology has the dual benefit of expediting claims and reducing risk by keeping people safe.
He adds that large insurance firms such as State Farm have “gone crazy” over drones because of the opportunities they offer.
Companies are also interested in fraud detection, he says, but that is not being patented because companies are reluctant to disclose publicly the intricacies of their security systems.
What are the challenges?With this new focus on innovation and subsequent reliance on the patent system come IP-related challenges that insurance companies did not have to deal with on a large scale before.
The insurance senior counsel points out that many of the inventions coming out of the insurance space could be considered abstract ideas, and thus are vulnerable in the US to Section 101 actions against patent eligibility. These patents are particularly vulnerable to covered business method actions at the Patent Trial and Appeal Board.
Lots of telematics solutions, for example, could be considered to be abstract ideas, and insurance companies must be prepared for jealous competitors filing invalidation actions to get access to these customer-focused technologies so that they don’t lose clients.
Delacruz at The Hartford says: “Recently we’ve been very successful at navigating legislative, judicial and administrative issues, but everyone has these challenges with the patent office.”
Another challenge for these newly patent-focused entities is enforcement. Insurance companies must be careful to ensure they are not spending money on patents for unenforceable solutions, such as black-boxed AI innovations, and are considering alternative forms of protection such as trade secrets.
But perhaps the greatest feat for these businesses is reforming and improving the processes that traditional patent-focused businesses have had a long time to refine, such as harvesting, external counsel management and IP planning.
“It’s about targeting protections for the critical technologies and being forward looking to see what will be the next key tech for our business and be proactive in protecting that,” says Delacruz. “These patents last for many years, after all, and they take many years to get.”
He adds that with all the uncertainty around Section 101, the business is also keen to ensure that it has the best private practice partners on its side that are knowledgeable of the insurance market.
Welton at Allstate adds that as insurance companies continue to evolve and become more like data and tech companies that offer insurance, the role of their in-house lawyers will get broader. These companies’ IP demands are rising fast and leadership teams are calling for smarter legal services in their organisations.
“One of our core functions is making sure we raise awareness and educate employees on IP cybersecurity and privacy regulations – because you cannot have one in our business without another,” she says.
“There are lots of legislative developments happening in all these areas that are applicable to insurance now in a way they would not have been seven to 10 years ago.”
At the moment, these challenges are confined to those insurance companies such as Allstate and The Hartford that have embraced innovation and have the revenue streams to fund R&D. Smaller insurance companies are not yet there.
But as smaller businesses start to see the value of this innovation and begin to embrace tools that will enable them to facilitate it, such as open source software and investment garnering solutions, the entire insurance sector could become a hotbed for consumer-focused inventiveness.
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