Many industries are behind on data analytics, the insurance industry however, is not one of them. Insurers have spent decades building their business models based on risk probabilities. Profiling and predicting the right balance of variables based on customer data has made them extremely profitable. The insurer that has been able to measure the expected cost of claims for individual policies the best, has held an enormous competitive advantage in terms of risk selection and pricing.
But by following this approach, insurers lost the focus of what is crucial to their success – the customer.
Over the last decade, the insurance industry has been slowly waking up to the fact that its business model needs to change. Consumers now expect rewards for their loyalty whether it be from their preferred insurer, retailer or healthcare provider. Personalized services, based on real-time, omnichannel data, offering flexibility and value for money also form part of this expectation. One one hand, consumers are willing to shop around to find the policies that best suit their lifestyles. On the other hand, they can cause great damage to the insurer´s reputation if they see their loyalty going unrewarded.
If a recent job description is to be believed, Amazon is now setting its sights on “disrupting the way traditional product insurance services are acquired and delivered and creating a new palette of services.” With its reputation for unparalleled disruption and efficiency, the digital retail giant is uniquely placed. Being able to utilize its data analytics expertise to cross-sell into insurance products, puts them ahead of traditional insurers.
Amazon’s subscription model ‘Prime’ retains an immense amount of relevant and powerful customer data that locks loyal subscribers into an expanding network of services. If Amazon can conquer regulatory concerns, Alexa, its popular voice assistant, could soon search for insurance policies across different providers, presenting an even greater threat to insurance brokers than policy comparison websites.
Digitally literate consumers are increasingly willing to accept less prominent providers who are ready to offer innovative, additional value-added services to existing and potential policies.
Fixing the problem
Insurers are in an excellent position to retain their competitive advantage, provided they can leverage their actuarian expertise to do so. They have access to enormous amounts of valuable customer data. Now is the time to utilize it to offer relevant products and services at ‘moments of truth’ along the customer journey. Insurers need to be permanently visible to enhance their customers´ life in a positive way, instead of only being there to protect against liabilities. Customers expect to see their insurer as a trusted advisor who understands their lifestyle choices and is able to react accordingly.
This doesn’t mean adding digital stopgap solutions to their existing business model. From the C-Suite down, insurance organisations need to view all interaction points along the customer journey from the customer´s perspective and act in an agile way to meet their needs. Relevant customer data is also key to measure effectiveness of marketing campaigns. Ensuring a continuous feedback loop, enables objective decision making while maximising marketing ROI.
The claims process is arguably the area where the quality of the insurer´s relationship with the customer is tested the most. The higher the level of empathy and efficiency with which the claim report is handled, the more likely the customer is to accept price differentiations and retain their loyalty. Here predictive and prescriptive analytics are essential tools in evaluating how the claim should be treated from the outset. Data-driven analytics can also aid in the fraud detection process, helping to prevent illegitimate claims pay-outs and enhancing the risk management and underwriting process.
The B2C insurance sector is immensely complex. Established insurers must not waste the unique opportunity to integrate themselves into their customers´ ecosystem as an essential and relevant service provider.