Make the most of your data
Possibly one of the biggest missed opportunities for insurers is not fully utilising the enormous amount of information that they harvest about their customers. They are experts at using it to price products and maintain sustainable loss ratios, and are becoming more sophisticated at fraud detection, but they are still missing an opportunity when it comes to growing their business through new products and more targeted approaches.
“The hot topic at the moment in e-commerce is data,” says Rhys Collins, Head of African Operations for SSP. “The fundamental challenge is two-fold. Insurers need to be able to monetise not only their own data, but data services from external providers and use these for profitable growth. Secondly they need to be able to exchange this data effectively – in particular between insurers and brokers.”
Basic socio-demographic data may no longer be sufficient to target consumers effectively. Insurers’ systems need to be able to effectively and electronically in real time access external data sources such as fraud and claims records to complement their own information. “This would not only give them a clearer picture of their customers,” says Collins, “but also enable them to provide accurate quotes more quickly – a key advantage in capturing market share from slower rivals and mitigating the chance of accepting high risk business.”
Initiatives like the Short term Insurance Data Exchange (STRIDE) and those implemented by South African Insurance Crime Bureau (SAICB) are prime examples of how data exchange is making headway in the insurance trade. STRIDE, and other similar orgainsations such as Webgate, were created to meet the objectives of the binder regulations set out by the Insurance Laws Amendment Act, and enable a standardised, consistent and technologically secure delivery of data between insurers and binder holders. Collins says these organisations offering data exchange services facilitate the transfer of short term policy and administrative information between the the insurer and the binder holder resulting in better cost management, greater efficiencies within the value chain, a real-time transaction capability and a single information standard.
Regarding SAICB, through its data exchange initiative, individual companies gain early access to high grade intelligence which allows them to more effectively focus their response to ongoing crime risks. They receive an early warning that individual claims may be fraudulent before settlement is made and the initiative offers an overall reduction in investigation and claims management costs. “These are but some of the gains that this initiative offers companies. There is also a strong likelihood that the disruption of syndicates orchestrating organised insurance fraud will lead to improved financial performance,” says Collins.
Using real-time quotation engines, whether internal, or provided by a third party, or cloud-based, would also improve underwriting by allowing insurers to implement rating updates across every channel as quickly as possible. Many companies will have to overcome the limitations of outdated back-office systems to achieve all this. “There are a number of entrants to the market that can provide a combination of data packages to improve the customer experience, and allow insurers to target segments of the market based on pre-defined criteria, not just the information captured at the point of sale,” Collins says. “For example, someone buying car insurance might provide their name, their car registration number and their postal code and address, and from that you can infer a whole load of information about them without having to ask more questions.”
The challenge for insurers is to bring all that data into one place so they are able to use it consistently regardless of the process the customer is going through or the channel they are using and still enable good working practices with trading partners such as brokers, aggregators and affinity partners.
“There is a lot of legacy IT out there. Insurers were early adopters of infrastructure, which means they’ve now got large, complex systems that are quite slow. Insurers need to make sure the systems they are looking at in future can aggregate all of this data to provide a consistent and consolidated view of their customers and the successes they are achieving in their target markets.”
“We will see a continuum of change. Some of the big insurers already have a level of sophistication, and there will no doubt be niche players too. There will be the early adopters, and everyone else will have to keep up or they will be left with business
that they don’t want to write. If existing players don’t get a handle on it, they will lose out,” concludes Collins.
