Paul Dix

Data analytics – how should insurers look to the future?

With a plethora of new data sources across the property and casualty (P&C) general insurance lifecycle now becoming available, how do insurers create an all-encompassing data analytics policy for the future?

There is now more connected information available about risk activity than at any point in the past. The opportunity for insurer intervention in policyholder’s day to day activities to prevent or mitigate a risk occurring is a reality.

Some examples of this are becoming part of the core fabric of the UK’s:

  • Connected homes
  • Connected and monitored energy usage
  • Connected and semi-autonomous cars
  • Smart buildings
  • Location-based monitoring
  • Device diagnostics available as Internet of Things (IoT) endpoints.

So is now the time to fundamentally re-think the insurance proposition based on an insurers’ analytics and intelligent automation options?

I wonder whether the investment that many UK insurers have made upgrading their core policy and claims processing engines may already be legacy, almost before implementation is finished.  The future is in real-time analysis of, and responses to, a basket of risks that a citizen is exposed to that will no longer be covered by a traditional house and contents or motor insurance policy.

So, if that is the case, what are the key technologies and capabilities that an insurer will require in the future?

  • The first, of course, is access to the information that is being generated by the citizen’s activity.  This is made more complicated by the need to gain the permission of the citizen to access and use that data as set out under the forthcoming General Data Protection Regulation (GDPR).  This can no longer be an annual lottery with an expectation of high levels of policyholder churn.
  • The second is the need to create new behavioural models that enable appropriate interventions that are seen as value adding by the citizen. This is where insurers have the opportunity to truly differentiate their offerings.  A strong brand, even if that requires development, will really help customers trust and understand these differentiated offerings.
  • The third is to create a new commercial model that reflects the value that a citizen is now deriving from this service.  This will likely be very different to the ‘claim’ that has traditionally been where insurers look to differentiate themselves, if price hasn’t already thrown them out of the game. Vitality, and reduced costs for regular gym members, in the health sector is one example of a move in this direction.

There has been much talk of the fourth industrial revolution and for insurance might this be the end game?

My observation is that insurers today are investing in analytics and automation as a means to drive further efficiencies in the existing market model and I am sure that this will continue to be a short term gain.  However, if the UK is to be a leading light for innovation, in our new post Brexit world is now the time for the UK’s insurance industry to rethink and become the leader that it once was in the development of risk management?

Please leave a comment and let me know what you think.  I’m interested to know how your organisation uses analytics to differentiate.

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