As published on InsideBigData on January 12, 2022 – 2022 Can Be Insurance’s Big Data Moment – insideBIGDATA
The insurance industry has a history of following other industries when it comes to adopting emerging technologies. While this has been OK in the past for managing customer relationships, the last 18 months have taught every industry the importance of customer relationships and strategically leveraging the right technologies to protect them. Thankfully insurance has one advantage over most industries in that it has been customer-centric from its very foundation. The current era has opened the door for new opportunities for insurers to increase the lifetime value of their customer relationships becoming an even more reliable partner during times of uncertainty. This article will outline a few major reasons that in my decades of experience in the industry I believe 2022 is when insurance can become a standard-bearer regarding innovative uses of big data and analytics.
Insurance is like a gold mine for customer data without any lights on
Without the right perspective on the treasure of data that insurers have access to, many smaller and medium-sized carriers do not have real awareness that they are sitting on a gold mine. This is from a perspective of the ability for data to transform internal business operations to improve growth, profitability, and reduce risk, but also from the ability to impress their customers with new ways to save them money and offer better protection. Thanks to some larger insurers, insurtechs, and technology vendors that have begun selling their insurance products, the fear of losing money by using “new” technology is rapidly fading. The example of sitting in a gold mine unknowingly is apropos because many businesses are using sensors, signals, smart devices, and other means to secure valuable customer data that insurance has had in policy and claims systems for decades. Now is the time to turn some lights on.
Actuaries need not fear data science anymore
Before data science, big data, analytics, and AI/ML began to make headlines in the insurance industry, most insurers relied upon actuaries to use existing P&C systems to identify risk. It is understandable that some actuaries actually could have been the barrier to experimentation with big data and analytics technologies as there could have been fear about changing the way they work and adapting to new technologies and processes. This fear is not only prevalent in insurance but the theme of advanced technologies replacing jobs is a real concern in many industries. However, I believe the role of an actuary and data scientist should be focused on interpreting the results of the analysis via advanced visualization tools and not the heavy lifting of preparing the data and looking at spreadsheets and other tabular presentations. Eliminating the challenging manipulation of data and relying on what you know as opposed to letting the data tell the story of what you should see in the data is a change that will improve decision-making. These improvements in business intelligence and analytics capabilities should be valued by actuaries as key assets to bolstering the accuracy of their risk management efforts.
For actuaries that have deep hands-on experience in organizing and analyzing data in painstaking manual or legacy systems, looking towards BI, data science, and analytics is like the difference between using a hammer or a platform of power tools to build a house. Actuaries may complete the job if they have the power, skill, and endurance depending on the size of the job or business problem. However, with big data, analytics, and AI/ML the hard work is being done by systems that can give actuaries a chance to see a more comprehensive and accurate picture of the insured. Based on my experience of serving as a virtual CIO at one of the world’s largest insurers before becoming a serial insurtech company founder, learning and leveraging these technologies are the best job security in the next decade for actuaries.
Sales and customer retention in 2022 will be intelligent
If an average insurer has been focusing on being a good neighborhood resource for families and communities, they can be lulled into a false sense of security that the status quo will keep the doors open. However, the insurance customer has been getting accustomed to Netflix, Amazon, smart thermostats, and other intelligent devices that have simplified and enhanced their lives. This means that younger and more tech-savvy consumers will increasingly begin to look negatively upon insurers that do not make any efforts to provide similar customer experiences.
This can mean insurers that can meet via Zoom and quickly process initial insurance applications, up-sell new products, process claims instantly, and proactively recommend ways to minimize risk will be viewed as the best option for these types of consumers.
Before 2020, insurers could still risk the old-world of relying upon a potential or an existing customer walking into their office to start or adjust coverage. The new world of doing business and functioning economically has shown that all businesses need to have an option for when in-person customer interactions are not possible or preferred. Here is a great option for insurers to consider for the power big data has for transforming their customer relationships.
Imagine if an insurer with the right technologies has been monitoring (with permission) a customer’s smart devices, this insurer could spot risk in the area based on previous flood data and connect with smart water sensors to send a consumer a proactive alert that flood risk season is starting. In the alert, the insurer can recommend that the customer adjust their insurance coverages based on the intelligence gleaned from an insurer’s data stores. This could increase sales and customer loyalty.
What this discussion boils down to is the difference between growth and profitability in the coming year and beyond for insurers. This hinges upon insurers running to embrace big data, analytics, and AI/ML to improve business intelligence instead of standing on the sidelines.
These last 18 months have gotten everyone’s attention, and 2022 will increase the reliance on more intelligent and flexible technology-based customer experiences. The three reasons that I have outlined are vital for insurers to process and make a proactive decision about which side of history they want to be on.