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The 3 Big Ps in Modern Insurance: Personalisation, Prediction and Prevention

 
 

Insights Through Data | Jay Chitnis |
19 January 2022

Society’s obsession with owning more and more possessions has dramatically increased over the last 5 years. For example, in 2020 13,000 more people in the UK owned a car compared to 2015, and almost 15,000 more people owned 2 cars within the same period. Increased ownership has inevitably led to a greater reliance on insurance and created a schism between insurers and their customers, with the latter often viewing the purchase of a policy as a ‘necessary evil’. This in turn has translated into a rather mechanical digital experience for customers, where the “personal” aspect of personal lines insurance has been replaced by a factory style with mass-produced policies. This experience is lacking the sophistication and innovation customers have come to expect from other industries, such as healthcare and retail.

The insurance companies that are succeeding are those who are evolving their digital operations to accommodate more than just the ‘premiums for protections’ mentality and who use data-driven experiences to personalise, predict and prevent. There is such potential for carriers to promote their products as more than just ‘grudge purchases’ if they harness the power and possibility of existing architecture as well as borrow innovative enhancements from other industries. The insurance industry should challenge itself – and be challenged! – to offer a ‘policy+’ experience for the benefit of its customers and the industry as a whole.

In 2019, the German Insurance Association (GDV) stated that on average around 80% of insurance products were still sold offline. Inevitably, this figure will have changed since then, with the effects of a global pandemic changing customers’ expectations of digital interactions regarding simplicity, convenience and efficiency. This pressure to meet customer expectations, similarly to the experiences in other industries, has dictated a more automated service offering.

But does automation always mean success? Of course, automation helps realise changes to cost structures and, one hopes, offer competitive pricing, but it still produces a one-dimensional vision of Insurance. In order to truly satisfy contemporary customers’ expectations, insurance companies should also consider the following aspects when developing their products.

PERSONALISATION

The insurance industry that we all know (and love!) can be difficult to get excited about, with its complex series of wordings and clauses leaving many perplexed or mistrusting about what they are actually purchasing. By personalising that experience for a customer, an insurer can enable a simpler interaction, removing the ‘gotcha’ aspect of policy wordings and aim to provide a more relevant experience for insurance customers.

Like in any other industry, the mantra that should dictate the development of any digital system should be giving the customer what they want when they want it – within reason. After all, they are paying for it! Amazon had this vision when introducing the one-click buy approach, and, similarly, Apple Pay gave customers the ability to complete a transaction in the simplest way possible. Utilising similar strategies and concentrating on customer-centricity, it is absolutely feasible for insurers to employ the same techniques for their product offering.

One strategic way to approach this is to take advantage of the homogenised nature of insurance products, combined with the ingenuity of data-driven AI (artificial intelligence) and machine learning capabilities. A well thought-out and constructed insurance engine can exploit the vast amounts of data known about the customer to analyse and evaluate each individual customer’s needs.

Personalisation measures can feed into more appropriate cover terms or recommendations, fuel more intuitive chatbots, prevent potentially fraudulent behaviour, limit the danger of mis-selling or help prioritise agents for more vulnerable customers.

PREDICTION

Travel insurers have been forced to re-think and re-purpose their infrastructure to cater for a post-COVID society where the value of an insurance policy is seen in its ability to react as or even before something happens. Many ‘digitally native’ travel insurers retained or won customers during this period by directly reacting to incidents and offering things like food vouchers in their inbox as soon as a flight was delayed or automatically booking hotel rooms or alternative journeys when restrictions changed travel plans. They delivered great benefits to customers by utilising relatively simple integrations with open-source data points like flight timetables and booking sites.

Even specialised insurers within the Lloyd’s market have realised that predictive analytics helps reduce issues and underwriting expenses, with 3 out of 5 reporting that the data has increased sales and profitability.

Predictive analytics has been table stakes for many years to help insurers with pricing and risk selection. However, what has changed is the variety of data made available by the wealth of new technology. In highly developed countries, IOT-enabled (Internet of Things) devices are now as prevalent as mobile phones, with insurers already harnessing this data to keep customers safer and their pricing algorithms more accurate.

Considering that in 2020 individuals created 1.7MB of data every second, the wealth of data will only increase, and successful insurers will be the ones who can effectively use this data to feed their predictive analytic tools.

PREVENTION

Helping to prevent losses and therefore potential claims makes business sense, but with recent events, it became less about the business implications of data-led prevention and more about the humanitarian consequences of such innovation.

The wildfires that devastated Australia over the past 3 years resulted in tragic loss of life, property and livelihoods and underlined the importance of insurance as well as the carriers’ responsibility to do what they can to prevent such losses. In California, insurance carriers reacted to their local wildfire risk by funding and organising teams to clear forest areas and in some circumstances spray policyholders’ homes with flame-retardant foam.

From a digital perspective, ever-more intelligent AI solutions will allow insurers to better predict such disasters and to actively lead and influence preventative measures, demonstrating their responsible and human side.

INSURANCE BECOMES TRULY PERSONAL

For insurers, the most important aspect of any digital product within the rapidly changing environment will be its flexibility to react and adapt, enabling the carriers to continue to offer products that provide protection while remaining an efficient business operation. Even more prevalent will be the social responsibility insurers have to share anonymised data as well as their expertise to offer predictive analytics and shift the traditional focus on protection more towards prevention.

At Endava, we are continuously challenging each other to be the best we can be, and this challenge extends to our customers who we work with to build and evolve digital solutions that can withstand in an ever-changing world. Technology is infinite and can be very exciting, therefore so should be our digital solutions.

Jay Chitnis

Industry Consultant

Jay has been working with Endava for almost 7 years and considers himself a bit of a “Swiss Army knife” within the organisation. Despite his experience and focus being within the Insurance space, both the London market and General Insurance, Jay still has a love for rolling up his sleeves and getting involved with delivery. He currently concentrates on scoping and sculpting delivery strategies, often being the glue that holds it all together. Jay very much works to live and is a keen triathlete, and him completing several endurance events in a year is not uncommon.

 

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