Insurance companies need to discover how rich they are
In a world where things evolve at light speed, it’s difficult to evaluate one’s own position. This is also true for insurance companies. Sure, tech companies could become new competitors, but insurance companies also have their strengths, like data for example. In a world where data ‘is the new oil’, insurance companies are sitting on some beautiful wells.
When using the word ‘data’ the general public immediately thinks about privacy issues. The big tech giants of Silicon Valley have created a new economy, new business models, new possibilities, all on the basis of data. In return for free services they collect huge amounts of data. Data of clients and others. But … ‘if the service is free, you are the product’.
As a result, there’s a new scandal popping up frequently. Facebook had its Cambridge Analytica-scandal. Google is accused of spying on its smart speakers-clients. To fight this, the European Union upgraded its privacy-rules, resulting in the much-discussed GDPR-regulation. Those rules were controversial at first but now seem to set a new standard in the world.
This is certainly not the end of the story. There’s new technology such as artificial intelligence. And there are new players, such as China, which play by a different set of rules. Rules where privacy is an obstacle instead of a goal.
While all these changes make many people uncomfortable, they can also bring good news to the insurance sector: data can be an incredible lever, but it needs to be handled with care.
Of course, insurance companies have a lot of data, or as we used to call it: information. To get a life insurance, a potential customer has to provide a lot of financial and medical information to the insurer. To get a car insurance, the driver gives information about which car and options he wants to buy, the use of the car, the financing. For a home insurance, the insurer requests a description of the exterior and interior including valuable objects. Insurance companies know what customers care for: valuable belongings, health care for themselves and their partners and kids, …
Is it a good idea to reflect on how to use this knowledge, these data? Yes, because people like a personalized service. Customers like it when you can make them an offer that answers to their needs. If you don’t sell a car insurance, but offer a mobility solution, combining methods of transport, financing, insurance, maintenance, … Customers like it when you don’t give them an off-the-shelf-solution, but one tailored to their needs and wishes. A solution based on them, not on you and your company.
People have adapted to living in a high tech world, where physical and digital channels are connected, where information and commercial offers are personalized. The expectations are much higher than before, the customer more self-aware than ever.
Another way of making use of increasing data streams is using data in a prevention context: avoiding that a claim needs to be created. Think about sensors in home insurance, cars, …
Insurance companies have the advantage –contrarily to tech companies and banks- that the public trust is high. And even if people may not like their insurance company, they still rely on them to work according to high ethical and technical standards. Insurers have to use that trust and make absolutely sure not to misuse it. This means the quality of the data has to be very good (correct, up-to-date, integrated) and the data has to be used according to strict deontological rules.
Worldwide there are already some experiments that can inspire and teach some lessons. With emerging technology, an insurance company can keep track of the way a specific customer drives his car: how often, how fast, how carefully. This data can help to differentiate the premium a customer has to pay. Or take the example of a health insurance: with a tracker such as Fitbit, insurance companies could have a view on how healthy the lifestyle of a customer is.
In these examples emerging technology is used to collect info, but as pointed out before, insurance companies have already a lot of ‘old-fashioned’ data. Accenture has just finished an extensive study on how ‘personalization’ can be done by insurers and mainly how this can benefit the customer.
Because of course there’s a danger. If data are used to systematically charge certain clients more, those people will not be happy. If data are spread (sold?) without the consent of the customer (owner), or accidentally leaked, he/she will not be happy. Insurance companies are sitting on an ‘oil well’, but they have to carefully stipulate a coherent policy. A policy about collecting data, combining them and putting this to good use.
This data policy is aimed at providing personalized offers to (potential) customers, and can also help improve internal procedures or monitor where risks become reality (and maybe help in prevention). This way data are a way to create a win-win-situation in the client-insurer relation, instead of a privacy intrusion.2019 Accenture Global Financial Services Consumer Study