What the insurance industry needs in 2023 - Part 3
The pandemic introduced worries, momentum and challenges that were bigger than companies had dealt with before. The ability to recognize where we stand can no longer take months.
Editor’s note: In part 2, the importance of taking a broader view of the industry through the use of data analytics was emphasized and the key to pivoting in today’s rapidly evolving post-pandemic insurance market. In part 3, the final installment in our series, we will connect the dots and lay out the best action plan for future success and profitability in 2023 and beyond. The initial installment of this series can be read here.
Data for good
Educating the industry has always been important and never more so than in today’s environment. The goal is to help insurers with the knowledge of the consumer benefits of data from the point of marketing to the point of claim — what data is used and what data is not used in determining how much each of us pays.
More than 85% of U.S. consumers get more competitive pricing thanks to the use of contributory data. This is seen through prior claims and policy data, credit attributes, vehicle, driving behavior and public records data that is infused into insurer workflows — across auto, home, commercial and life insurance.
Why is more data important? We need to be messaging to consumers that in pricing, the more variables used in a consumer’s premium calculation, the less likely one single variable is to impact the insurance premium. For instance, they need to know that an unfortunate speeding ticket could increase an individual’s premium dramatically if this were the only variable used in pricing.
Luckily for consumers, there are many others that would offset the premium impact, and data is a key driver in helping make that happen. And when we add data — such as connected car and vehicle ADAS features, that can bring additional opportunities for reduced risk, safer driving and safer cars.
Big life events such as a new baby in the family or a home purchase changes consumers’ insurance needs. By alerting insurers about these life events, we can help insurers support consumers in making sure that they have the additional insurance protection they need.
About 92% of insurers use data pre-fill solutions to give consumers a faster, more accurate insurance quoting experience and reduce the opportunities for fraud. In life insurance, we took what was a 45-60+-day process and streamlined it into minutes. Consumers need to know that at its core, it comes down to data and innovation.
This new process was crucial during the pandemic when insurers couldn’t send out a nurse with needles. The pandemic, while challenging for all of us, actually created opportunities for insurers to think differently and use data and analytics like never before. Thanks to data, life insurers can get more policies into the hands of more consumers. Again, this all goes back to that broader view we need across the insurance industry.
Connecting the dots
McKinsey reports that insurers who employ advanced data analytics can see their loss ratios improve from 3% to 5%, their business premiums increase 10% to 15% and customer retention in profitable segments jump from 5% to 10%.
With the proliferation of so much data now at our fingertips, insurers have a great opportunity to create an insurance value chain that provides consumers with more personalized products, helping to not only bring in new customers, but retain those that may have evolving needs. With data-derived analytics, insurers can use predictive analytics to help forecast events and gain actionable insights designed to engage with customers at the right time and on the right channel.
Predictive analytics are also playing a large role in helping insurers identify various instances of fraud before it happens or even take retroactive measures to pursue corrective action. The Coalition Against Insurance Fraud estimates that insurance fraud steals at least $308.6 billion every year from American consumers!
Finally, with the ever-increasing digitization of our world, insurers must continue to expedite their internal processes or workflows to help ensure customer satisfaction. Having access to real-time data that is seamlessly integrated into insurer workflows simplifies and expedites the underwriting and claims processes, and consumers are more willing than ever before to share their data in exchange for lower premiums.
So, with so much change and opportunity right before our eyes, insurers have big decisions to make. In our conversations with them about how to best leverage data across the insurance workflow and customer continuum — point of quote to point of claim — many are asking the same question: what is your recommendation on how to implement these new solutions? Do I leverage what I already have and continue to incorporate new data into my current workflows? Do I start completely from scratch? How is artificial intelligence set to change the game? And finally, how do I formulate a constant loop of knowledge from the beginning of the relationship with the consumer all the way through the claims event, to better understand the needs of my customer?
Because one thing is certain. We now live in a self-service world, and consumers have come to expect highly personalized and efficient engagements with insurers. Many insurers often fail to realize their own on boarding processes will always be compared to the consumer’s best experience. Unfortunately, this change in mindset is not always a simple shift in the paradigm for insurers who have been doing things the same way for decades, and those who do not properly leverage data and adapt to our “new normal” will almost certainly fall behind the competition.
No going back
All of us in the insurance industry have stepped into the broader view at a time when the industry needed it most, and we have learned that there is no going back. The broader view of the market is an integral component to truly understanding the health of insurers’ businesses and what their customers need most…and seeing the bigger questions that surround it.
Bill Madison is chief executive officer of the insurance segment of LexisNexis Risk Solutions. He is responsible for all auto, home, life and commercial insurance business including solutions for underwriting, claims, and analytics, for the U.S. and international markets. Contact him at Bill.madison@lexisnexisrisk.com.
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