In an earlier blog, we gave an overview of the adoption of analytics in the insurance industry. In this blog, we highlight one of the key trends in Insurance around the development of personalized offerings using rich individual-level data. Three perspectives are driving the evolution of this theme. We go into detail of each below:
1. Shift from Product to Customer Personalized Offerings
Traditionally, brands were built around the product/service value proposition. The focus was on the product and not on the customer. Banks and retailers have gradually moved to a more customer-centric strategy and approach, and that has paid rich dividends. Consumer goods brands lack a direct connection with consumers, often going through a distribution/retail channel, and it is understandable for them to have a product focus.
However, that’s not the case with the insurance industry. Insurance companies not only have access to customers but also have intricate knowledge of them. And yet until the recent past, they weren’t entirely customer-driven. Lately, this transition has started taking place to a significant extent with many insurance companies taking steps to make customer focus their core.
2. Competition from InsurTech
InsurTech companies are coming up with innovative solutions and disrupting the traditional insurance space – these companies are digital native, technology & data focused, and are creating niches for themselves with different customer segments. They are breaking the traditional insurance solutions to micro-solutions and empowering customers to create personalized bundles/solutions for themselves. These micro-solutions are often priced based on customer-specific behavioral data and the pricing happens near real-time. The InsurTech companies themselves are betting on automated claims settlement driven by self-service and quick to pay experience for customers.
3. Threat from Big Tech
Like it or not, Big Tech is coming. Some realize the threat, some feel it is impractical, some feel that the whole idea is too far-fetched. Companies such as Facebook, Google, Amazon, and Apple, have some of the richest demographic, psychographic and behavioral data at a personal level. They have been in the news, about data usage of their customers for various purposes ranging from influencing elections to purchase behaviors. The prospect of them offering customized insurance products and services, using smarter data-driven underwriting and marketing does not seem far-fetched. These could be either bundled with the digital buying behavior of the consumer (both business and retail), or as a follow-on activity, by harnessing information about the customers.
The time to act is now
The traditional insurance carrier doesn’t have access to such rich digital data, but they make up for it by having access to proprietary data that others might be able to acquire easily (e.g. health records, sensor & telemetry data etc). Data will prove to be a key differentiator as various entities aim to become the single point for providing financial products to consumers. Some entities are ahead in terms of data & technology capabilities while others have the whole backyard for insurance processes and operations, and we have to wait and watch evolves over the next 5 years.
With all these changes and threat perceptions, the insurance carriers are faced with multiple dilemmas – How do we build richer data profiles of customers that is better than what their digital competitors can? Do we need certain partnerships with other players who can become competitors? Do we build data-driven insurance solutions in-house or partner for faster and efficient execution?
Whatever be the approach Insurance companies take, it is clear that they cannot ignore these shifts in the industry. At Tiger Analytics, we are partnering with our clients to help them evolve using data, technology, and analytics – helping them bolster their strengths, bridge significant gaps, and innovating to push the boundaries and disrupt the industry further with personalized offerings for their customers.