With a new guide for insurance companies, the IBM Institute for Business Value (IBV) addresses everyone who deals with the strategic value of data as the resource of the future. The key statements from the new study: Data is the primary resource and heart of a connected world. One of the main reasons why intermediaries are still the most powerful insurance distribution channel is that they are the gatekeepers of information: they typically know their customers best, better than the insurance company itself.
DThe traditional insurance agent gradually disappears for various reasons. In a digital world, insurance companies need to collect data themselves, which means their customers need to be willing to share this valuable resource with them. How can insurance companies do this? IBM The IBV survey of nearly 16,000 consumers in 24 countries shows the way: Insurance companies need to strengthen trust, create benefits and facilitate exchanges.
Only every fifth insurance customer wants to share their profile on social media
68 percent of the insurance experts surveyed in 2016 stated that the acceptance of data and information exchange will increase over the next ten years. But only 21 percent of insurance customers surveyed are willing to share their social media profiles with their insurance companies. And: 47 percent of insurance customers surveyed expect personalized services tailored to their specific activity context.
Technology fundamentally changes our daily lives as consumers; how we work, shop, date, play, among many other things. Businesses, governments and individuals become connected and our interactions become digital. This change fundamentally changes the business administration. Traditional value chains are fragmented as technology breaks down industrial structures and processes into smaller and smaller segments. Industries converge when new competitors compete in specific industries. New types of business environments – business ecosystems – have emerged, displacing traditional industry paradigms that support the creation of new environments and seamless, sophisticated customer experiences.
New technologies are changing the value chain
For insurers, the underlying technologies span the entire value chain from marketing and product development to claims settlement and customer care. Today, these tools include artificial intelligence (AI) and cognitive computing, cloud, mobile technologies, social tools and networks, the Internet of Things and many others. Each of these technologies causes small and large changes that lead to major dislocations in the industry in the medium to long term. Data is at the heart of all these digital changes. Data is the resource that insurance companies need to digitally reinvent their organizations and the insurance industry.
Using data to measure individual risk leads to different types of use-based insurances for car, home or even health related endeavors. By using analytics to better understand these risks, insurers of product-threatened products can rely on risk-reducing and preventative products. Digitized data can improve the speed of all customer-facing processes such as rating, underwriting and requirements by automating decision making. In addition, customer satisfaction can be increased through personalization. There is also a whole new group of companies, called InsurTechs, driven by data and new technologies. The business models range from pure online insurance companies to brokers to providers within parts of the insurance value chain such as analytics and insurance software providers.
In interviews conducted by machine inspection experts in recent years, executives of traditional insurance companies often stated that they were not interested in individualized risk calculations; instead, they argue that their classic mandate as insurers is to balance the policyholder community, with better risks that automatically ensure subsidization of inferior insurances. But even when this is the case, whether due to regulation or customer preferences, insurers still need to collect individual data. Because customers are getting used to the personal and tailored service across all sectors and expect the same from their insurance companies.
Conclusion: Data is THE key resource to serve customers better
In the digital age, data is the essential resource that insurance companies need to best serve the changing needs of their customers. The Institute for Business Value believes – along with a large majority of insurance companies that do better – that data can be gold. If insurers can not persuade their customers to share more with them by increasing their credibility, making the benefits of sharing understandable and reducing the perceived cost of data sharing, this effort may stall in the middle.
Questions that insurance companies must therefore ask themselves – according to IBM – are:
1. How do you engage directly with clients, in addition to agents and brokers?
2. What new offers besides classic insurance are you considering?
3. How do you ensure that customers trust your data?
4. What benefits do customers get from sharing their data? What benefits do you have? How do you make sure you both see yourself in a win-win situation?
5. What technologies do you use to reduce effort by exchanging information?
The study “Data – Gold or Kryptonite?” can be free and without giving address here be downloaded.aj