Data analytics and AI are buzz words of our times. Many people are warming up to the idea of harnessing the immense power of data mining and intelligent programming as multipliers of their businesses. The complex domain of insurance is no exception to that trend. Interestingly, data wrangling has for long been a key towards running a successful insurance business. From estimating mortality rates and sizing customer demands, to making effective sales and distribution strategies – it’s always been done via data-driven decision-making. So then, what’s new?
Firstly, the advent of digital platforms. Today, an entire customer journey can be captured digitally through technology. It begins with sourcing the policy through OTP consent and eliminating physical signatures. The app-savvy customer, while navigating the online portals and interacting with specialized bots, end up revealing significant trends in customer demands and pain-points, side-stepping the onerous, and frankly far more costly method of data collections through field activities and sales force feedback. The app and web-portals are very effective in providing targeted customer management, be it reminders for upcoming premium payments or flashing new product promotions.
Speaking of promotions, data is being used increasingly in deducing the right mix of products that would be attractive to the customers. Knowing a customer who has just insured her 3-storey house is to also know whether she needs to insure her car, or whether she needs to top up the medical coverage for her aging parents. Better tools and technology parse the customer data far more effectively, identifying such cross-sell and up-sell opportunities while optimally leveraging their firm’s distribution diversity and outreach.
The data insights can paint a far more intricate picture of the customer’s lifestyle, which enables the insurer to arrive at a financially viable product. Let’s take an example where many companies have started using credit risk scores to correlate customer discipline and financial wellbeing with life expectancy. A good credit score reflects regularity of income and lifestyle, which in turn indicates an ability to lead a healthier and stress-free life. Tracking customer behaviour through smart phones and wearable devices have become a useful method to build risk scores, especially where products must be made available over the counter without complexities of medical underwriting or financial due diligence. In many parts of the world, car-mounted sensors provide real-time data on customer behaviour, which feed directly into dynamic pricing of their car insurance. In the same vein, life and health insurance companies are promoting fitness bands and wellness apps tracking BMI, stress, and physical activities. New age techniques like video medicals and retina scan have gained momentum which can help approve a proposal at the blink of an eye. This assumes immense significance in the present troubled times, with the COVID pandemic unlocking a huge pent up demand for health and life insurance products that are affordable and can easily reach large swaths of the population that are living in a lockdown. The only practical way to assuage this demand is a coordinated outreach by the insurers, armed with tools that enable digital underwriting, policy issuance and management.
With growing complexities of business, diverse distributions channels, expansion of digital sales and threat of cyber-attacks, fraud has become an increasingly critical issue. It’s hard to eliminate but can definitely be controlled. Companies are steering their focus on AI-driven tools to automatically identify fake ID and impersonations, both at issuance and claims stages. Such tools are also effective in identifying anomalies in policy experiences. In addition, biometric data are fast becoming indispensable in KYC procedures. The resulting seamless process is not only safer but is also creating a hassle-free customer journey.
In summary, data and technology today have formed an unique feedback cycle where new and efficient technologies are making it possible to do more creative data analysis, which in turn are opening the door to newer business opportunities and challenges that are fuelling the demand for better technologies and analytical tools. They both define the problem and drive the next generation of solutions. The insurance industry is now flourishing in this new normal and is ready to take a leap into the future.