Data & Analytics: The Top 5 Opportunities for the Insurance Market

Data & Analytics: The Top 5 Opportunities for the Insurance Market

Data & Analytics: The Top 5 Opportunities for the Insurance Market

The insurance business to me has always been a slow moving one!  In certain ways, I find the Insurance market as old as the dinosaurs!  The behemoth insurers in the UK i.e. the Direct Line Group, Ageas, Aviva, AXA, LV etc. are all huge businesses insuring our homes, cars, travel, lives, health and so on.

The main premise of the insurance industry is to work on the basis of risk.  We (consumers) take out insurance policies to ensure if anything adverse happens to us or our belongings, our insurance claim kicks in and covers us from harm.  In principle this is the essence of the Insurance market – there isn’t a great deal of complexity around it.  However, while we purchase these policies, we hand over data that is extremely rich about ourselves, from simple things like name and address, to what health issues we have, to how many car accidents we have had over the years and so on.

This is very in-depth and wide data that the insurance industry holds on us, and yes there are profound privacy reasons where health or other data types have been consumed by our insurers which we as consumers wouldn’t want exposing and impinge on our right to privacy.  This article isn’t about privacy, which is in itself a massive and noteworthy topic to be discussed separately.

This article is more about why the insurance industry has been so slow to move forward with data and analytics.  I’m sure many insurers that read this article will probably state that they are far more advanced than what has been stated here – I would like to hear from those people.

What challenges do insurers currently have with data and analytics?

The proliferation of data across multiple platforms and systems – an age old issue for many companies in particular the insurance market.  Many have invested in legacy applications that hold precious volumes of data and on the opposing side they have newer platforms and systems in the cloud that house data that is easy to get at through APIs etc.

The use of excel across the enterprise – you know who you are – you love Excel and quite rightly so!  You have been using it for eons, you can manipulate it to your hearts content, you can make it say what you want.  The issue is that it doesn’t transcend across the organisation well, it leads to mass manipulation where multiple touchpoints corrupt formulas and an endless cycle of fixing those formulas.  I suspect, actually bet, that if you gave 100 people in the same organisation the same data in an excel spreadsheet to answer specific questions, you would probably get 100 different results or thereabouts!  There will always be naysayers to this, and I’m sure they are the mainstay that will always depend on Excel for analysis.

Marketing – neither rhyme nor rhythm – marketers these days are gagging for better ROI, more punters coming through the pipeline, a better understanding of their customers (more insights), with it more personalisation (crying out for it!), and of course better targeted (laser focused) campaigns.  In the insurance industry, and this may sound harsh on marketers, are you still working on the assumption that once you have bagged a customer that’s it, and there is no real push to focus on their needs?  Well, of course you’re not, and you wouldn’t be doing your job.  The main issue for marketers is to make use of the plethora of data that you have.  It’s a microcosm of the overall issue that the insurance organisation struggles with – so many different systems and platforms have

morphed that the marketing department may well have too many customer interactions on email, weblogs, clickstreams, eCommerce, CRM, excel spreadsheets, access databases – the list is endless.  The main issues for marketers are and I feel for you here – the regulatory aspects of customer information – what can you do with it, and when can you use it. It’s a tough space to be in with the customer journey being the main focus, however, the data part is the toughest of all to keep up with.

Too BIG to fail – do we have the next banking crisis waiting to happen!  Are the big insurers not agile and nimble enough to rethink their business or product models, when they have been doing the same things for eons?  Well, here comes one of the biggest challenges that the Insurance market faces – the Fintech / Insure tech disruptor or the Uberisation of the insurance market.  No longer can the big boys sit back and smoke their cigars – I know that’s probably a generalisation and my apologies – that’s what I see when I think of the insurance industry – wrists slapped!  But, think about it, we have not only had Uber, but, PayPal, AirBnb and Tesla all disrupted industries that have been around since the dawn of time, who were too slow to adjust their thinking.  A bit dramatic I know!   The main focus of many of the new brands, who are probably in “stealth” mode, will be a “customer first” strategy. Nothing novel at all, just the fact that they can move quicker to market, test, learn and tweak all strategies!

“A survey of 2,005 British adults, on behalf of GMC in March 2016, found that “85 percent of consumers with insurance would like their insurer to give them insight into how they could lower their premium, for instance by suggesting changes in behaviour.””

I bet your asking yourself, ok, well what do these big players need to do to ensure they don’t get left further behind.  These are the foundations for an insurer to make sure they can keep pace with the revolution that is around the corner:

Invest in a Data Integration Strategy – this is the biggie – if insurers can get this right then it’s party time for everyone!  Big blue defines data integration as: “discovery, cleansing, monitoring, transforming and delivery of data from a variety of sources.”  A very large and wide topic which covers a multitude of disciplines, so let’s see if I can explain this in shorthand!  Here goes:

  • Use the multitude of systems that are available to chuck data into – I know that this means you might need to stand up Amazon Red Shift, Hadoop, Google Cloud, multiple data warehouses – the idea is to make your data available from the systems they are in – legacy or cloud applications. This makes your data open and useable.  You will already have a multitude of systems – putting them into a consolidated set and then further consolidation into one database may be most beneficial for you – funnel your data once and once more again.  The benefit of consolidating data through multiple systems and then into one, means that you have one and only one avenue to then pump the data back into their original systems.  You can make more of your legacy data and it can become more open to your employees that need it.
  • Regulation and fines that come with it – Data Governance your data to death – one thing that most forget when putting their data integration strategy together is – Data Governance! If insurers don’t tackle this, then they are in for a pricey future, when it will become far more expensive to fix, and most will think they might as well forget it!  Well, don’t – data governance if done correctly can be quite the sublime reality – you must have policies in place for data that determine who uses it, how to secure it, who owns the it, how to define it, and to make sure that when the data moves from one application to another there is consistency and integrity.  If these aren’t done, then moving against a smaller nimbler player (disruptor) will be far more difficult.  Yes, you are a big organisation and you need to suck it up and make sure you get this right – this is the future and data is going to make you prince or pauper!  At the end of the day, data governance is the job of everyone across the organisation not just IT or your data department. Those that will disrupt this industry are living, breathing and loving their data, day in day out!
  • Build a data hub – can you imagine all the interfaces that insurance companies have to deal with, why not streamline them into a data hub so that they can be managed more effectively, efficiently and in some cases much cheaper to deliver the data to the right analytics applications. IMHO – the data hub can act as a test bed for data analysts, data scientists, curious business folks that want to get their hands on data faster to develop, test and create new data driven applications that can be deployed faster than ever before (sounds like the six-million-dollar man!). By doing this and unifying your data it increases the value of the information that is being utilised by the organisation.

One industry consultant explains –  Sachin Shah, a partner in financial services and IT at Bain & Company, explains the challenge: “Each insurance company has very bespoke systems and, as advances in the business have taken place, they have added new systems and gotten into a real mess.”

I may have missed out a few things, however, I think I’ve got the crux of the issues presented.  If you would like to add please do so.

How will this all help the business as you ask yourself?  In the insurance industry we are walking into a major calamity waiting to happen – I know that many will say what about the driving applications that have been built to ensure better insurance plans etc.  No the business opportunity in the Insurance industry once they have their data front and centre is as follows:

Better customer experience – the data revolution has come and is almost gone – customers need a better more personalised service, more channels that are able to quickly respond to their needs, not just apps bought for the sake of it.  The insurance market now more than ever is in its greatest revolutionary moment – when customers want more – think about the customer, understand their avenues of interaction, bring all of their data together, generate a more personalised service that is memorable and a pleasure to interact with.  Be it in an instant or over time – there are different types of customers who need your attention.  One example that we applied in the Insurance industry was personalising a marketing campaign to customers across multiple demographics.  We analysed the campaign almost hourly, at every touch point for every demographic with every agent being analysed for script, effectiveness and conversion.  What it taught us (simple things) – certain customers will convert at different times of the day, using different scripts and specific agents at different touchpoints.  Run, analyse, tweak, run again and repeat.  It’s not difficult to do this amongst the data that is held, and you don’t need a massive team to bring the data together and analyse it to provide insights.  You don’t need big projects – they can be small test beds for larger projects to prove that they can be scaled.  I think those who win in the Insurance industry will be those that are far nimbler and agile.

Were dinosaurs more agile? – Agile has become a very cool topic to band around.  Companies are asking themselves how they can become more agile.  How are they able to respond to market opportunities quickly and be able to offer new products? How much are they being impacted by how long system changes take before being able to go to market with a new proposition? Do they have the right resources that will help you towards launching a new or tweaking an existing product to market?  Are they able to run small test beds of “what-if” scenarios before they launch new range of products?   If companies can’t answer these questions, then Houston we have a problem.  If insurance companies took as leaf out of companies such as Google where innovation occurs with employees working on their own agile projects, they might have the next breakthrough, not just attempting to follow or buy up companies.  Agile itself is a concept that can be applied to any scenario or situation.

The Agile that we know is where requirements are a little looser and can be changed mid-flight which helps a learning approach; moving into the development stage with such fluid requirements can help to build something quickly and create a market advantage, and of course changing the business processes will always be something that will be a part of any agile process and systemically great for any company.  There are many processes that need to be adapted for agility, management approval, budget allocation, planning – these are all areas that need to be looked at to remain competitive, to innovate faster and move quicker to market.

A brave new world Fintech / Insure tech – I was recently at a conference put together by Ovum and listened to Ian Cohen (ex JLT CIO), talking about his work with start-ups that are working to disrupt the insurance market.  His main premise and I think I’ve largely covered it in the article, are that insurers need to be aware of these small companies – for what reasons.  I’m attempting to recall his pitch at the conference and I think it was along the lines that these insurance disruptors don’t have to invest in the big systems that incumbents once did, they have access to open source frameworks, are able to scale using cloud computing and work on the premise of doing development “On-Demand.”  Incumbents aren’t able to move as quicker, have too much red tape, and these newer players are able to focus more on customer and partner with 3rd parties that the incumbents wouldn’t think about.  Here are some examples of how these start-ups are racing ahead:

  • Knip – is a Swiss company founded by Christina Kehl and Dennis who have developed an innovative digital insurance manager (app) that provides consumers with an overview and analysis of existing insurance policies, tariffs and services.  It has been designed to automatically detect insurance gaps and recommend essential insurance.
  • Metromile – (extract taken from nerdwallet) offers pay-per-mile car insurance aimed at city dwellers. The company estimates that those who drive less than 10,000 miles per year can save hundreds of dollars on their annual premiums.
  • Insurethebox –  a company that fits a telematics device in your car that looks at speed, time of day that you drive, if you brake or accelerate sharply, how many miles etc.  Helping younger drivers save significantly on their insurance premiums.
  • Nauto – (source Techcrunch) co-founded in 2015 by CEO Stefan Heck and CTO Frederick Soo is a San Francisco- based company.  Merging artificial intelligence with dashcams, Nauto’s systems detect what’s happening on the road ahead of a driver, and within their vehicle. The system alerts drivers when there’s a problem ahead, or a dangerous distraction within, to help them avoid collisions.  It automatically understands when a collision is about to happen, and records the scene inside and outside of the car. Images and data about the incident are stored in the cloud, and can be shared with a fleet manager or driver via Nauto’s mobile app, which proves handy for resolving questions of liability. The founders are helping insurance companies designing new products and pricing strategies around the and real-time data they hold.
  • Friendsurance – (Extract taken from the Economist June 15th 2012) This is the question that got Tim Kunde, an entrepreneur based in Berlin, to launch Friendsurance, a website that is now considered the pioneer of what one day may be called “social” or “person-to-person” (p2p) insurance. The idea is to more efficiently replicate for a group of friends what traditional insurance companies do for a large number of strangers. Friendsurance offers household, personal-liability and legal-expenses insurance. Large claims are still covered by normal insurers, with whom the firm has partnerships. But the costs of smaller claims, which would normally be paid by a policyholder as part of a “deductible” amount, are shared within a small circle of friends, who can either sign up as a group or hook up on the site. Part of their premiums are set aside to settle these small claims. If something is left over at the end of the year, each friend gets back his share

I’ve heard there are companies like The Floow & BoughtbyMany who are doing some good things using social media, I’m hoping that Ian Cohen or someone else will comment on the disruptors in the insurance market.

Let’s not forget about the “The Internet of Things” – Sensors and internet-connected devices will provide insurers a new range of datasets. This is where the marketers dream comes to life and the ability for the insurance marketer to personalise insurance in this brave new world, using some behavioural principles – that’s pretty cool stuff – finally! For example, health insurers and life insurers are already probably making use of things like myfitness pal, fitbits, electronic calorie counters, how many steps they have walked etc., accessing personal data (that most of us are ok to give up – I think), to review lifestyles and understand the health of an individual, and look at the risk over time to understand what insurance they need.

Technology providers like Amazon now have platforms to support (excerpt taken from techtarget) “AWS IoT (Amazon internet of things) is an Amazon Web Services platform that collects and analyzes data from internet-connected devices and sensors and connects that data to AWS cloud applications. AWS IoT can collect data from billions of devices and connect them to endpoints for other AWS tools and services, allowing a developer to tie that data into an application.” [Citing as an example, and don’t push this or any other technology.]

I am unsure as to how much the insurers have started to play in this space, given it’s a fairly new space and full of buzz words.  However, I’m sure that many will say “of course we are doing it” not being seen to be lagging behind – let’s see how well they have commercialised these new concepts.

Even though we can amass all of this data, I think this is where regulation will have the most issues with consumer data and privacy!

As I sit here and think about this there is probably the biggest elephant in the room I have left out!  It’s staring at me from the corner of my kitchen!  Words that most companies don’t want to hear, but in order to adapt and to change in this ever growing tech / new concepts space – Organisational Change & Process Improvement. Data projects and these two go hand in hand.  If we don’t do this, then companies will fail to grasp the reality that they are in.  Layers upon layers of illusion!  If the insurance behemoths want to implement data, analytics, Big Data, IOT and all the new concepts that will be coming down the line – then the dinosaur needs to become an agile one taking into view a systemic blowing up of “how things have always been done”.

Thanks for reading this post and please do leave your comments, we will be intrigued to find out from those in the industry who the “true” movers and shakers are.