Utilizing Data Opportunities and Risks in Insurance to Protect Customers and Drive Greater DifferentiationInsurers Have a Great Opportunity to Become Guardians of Customer Data
The rapid rise of digitalization and new data-gathering technologies has encouraged a lot of well-meaning advice about how insurers can use data more effectively to generate business and provide better customer service. Such advice is often restricted to personalization, pre-populating forms, self-service client portals and streamlining the claims process.
This advice has become overly predictable and lacks imagination. Insurers have a great opportunity here to become trusted guardians of customer data, while offering valuable services, rather than simply attracting short-term business by being the cheapest and being restricted by the confines of a ‘commodity’. The challenge lies in having the right data at the right time for the right customer.
Data gathering hurdles
Greater data-sharing opportunities and collaboration makes it easier to identify and understand good customers, not just the bad.
Organizations like banks and supermarkets have an ongoing and in-depth view of their customers’ data, providing deep insight into their behaviour - what appeals to them, what they’re looking for, and what their risk profile looks like.
By contrast, as an insurer you will get snapshot information at underwriting, but after that there’s little or no contact with a customer unless of course they make a claim, the point at which you find out most about their customers, good and bad.
Imagine you had the ability to track many of the things your customers take a gamble on today. Like it or not, phones are now being used to track our movements, both on our phones and our location, and IoT is able to track objects like fridges and washing machines to detect problems that could cause insurance risk, which may otherwise go unnoticed.
There are two key barriers keeping this information out of reach - people’s natural suspicion about how their personal data is being used and concern about its security, and the sector’s current inability to incentivise customers sufficiently to take it on.
Why should people let an insurer track their day to day activities if all they get in return is a small reduction in their premium? What’s far more likely to convince them is being offered something that significantly helps improve their life, keep them safe from harm or loss, or even save them money. So what might that look like?
Creating more data capture opportunities
Imagine your fridge has had a manufacturer recall notice for causing fires and your insurer can let you know immediately, cutting the risk to your home and property? This kind of protection against loss of possessions, and the resulting stress and inconvenience, is surely a genuine win-win scenario.
Of course, the rapid growth in this kind of data collection and exploitation comes with a threat from fraudsters seeking to hijack information and use it for criminal purposes, so it’s critical for insurers to protect customers against this too.
Data collaboration to combat cyber threats
In the past, claims systems have only passed the minimum data to fraud teams, focusing on required data for a single specific purpose. The technical challenges of cleansing and preparing data more broadly often outweighed the benefits of sharing it. Huge strides have been made in the fight to stay one step ahead of the criminals, and data sharing and analysis has a big part to play.
Today those barriers have been significantly reduced, creating greater data-sharing opportunities across teams to enable more accurate fraud identification, especially when combined with third-party and industry data, connected through advanced entity networks and link analysis.
Greater data-sharing opportunities and collaboration makes it easier to identify and understand good customers, not just the bad. For example, you as an insurers can delineate the risk profiles of an applicant who shares an address with another customer. Although the two may have the same address and possibly surname, their risk profiles could be wildly different.
If one has never made a claim, insurers will want to factor that into competitive rates; if the other is behind on renewals and applies for a second policy, insurers will want to ensure that’s flagged.
Insurers will no longer miss an opportunity with good customers because underwriting has not made the connection that a good fraud detection system does automatically.
At the end of the day, insurers are looking to protect good customers whether it’s preventing car theft or foiling fraudsters; and the trick to doing both lies in the data.