Building a solid data foundation is important in order to prepare for the future of the life insurance industry. Accessing and analyzing data to create meaningful insights is the gateway to improving everything from decision-making to CX to critical processes and products.
In this article, we answer some strategic questions that carriers need to consider when developing their data strategy.
How can insurance carriers gain a competitive advantage by leveraging their data?
Carriers are relying on customer feedback as a source of truth
Carriers are leveraging data to translate what customers are saying about them into what the brand needs to know about their operations. There are many ways this can take shape, from streamlining operations to mitigating dissatisfaction when it comes to certain customer pain points.
Discerning the difference between perception and reality is important when looking for how to make sense of customer feedback data based on the internal data that the carriers already have. For example, a carrier could place emphasis on having a great product. However, if that product isn’t explained well, customers might give the product a low rating. Being able to pick apart those differences is extremely important.
Customer feedback is also essential in determining what is important to customers in terms of new business. Sometimes the data reveals insights that challenge conventional thinking. Most recently, the Information Services company, J.D. Power, conducted a life insurance shopping study that revealed that customers are actually more attuned to the long-term viability of a brand than price when shopping for life insurance. This goes against the conventional thinking that everyone is focused on the idea that "price is king”.
Building Actuarial Pricing Models
Building actuarial pricing models is the holy grail of data. It involves aggregating everything from quotes to claims and trying to get a true 360 modeling of your customer, their lifestyle, and biometrics to evaluate and price products.
“It’s a very competitive industry that we work in. The types of products being sold today are marginal to each other – they’re not really differentiating for features; they’re differentiating a lot for the price.” – Brian Carey, Industry Principal, Insurance, Equisoft
That being said, data will enable competitive breakthroughs if it can be harnessed to enhance evaluation and rating, reduce the size of the cohort and try to model and understand the customer throughout the term of the policy.
Carriers being able to get their hands on all that data, and interpret it, is incredibly important.
Using data to build a continuous underwriting model
As millennials and Gen Z enter the market, being able to make intelligent underwriting decisions with limited evidence is where the industry is headed. With wearables, the Internet of Things (IoT), carriers are getting closer to achieving ongoing automated underwriting that happens throughout the lifecycle of a policy journey.
The industry is beginning to move past the once-and-done underwriting of 40 years ago‒where the carrier would check the customers’ health and give them a price at that point in time. Access to data means that carriers can leverage continuous underwriting to offers and pricing as customer situations evolve. Being able to understand the data now and use it to create models that predict future states enables carriers to test hypotheses and craft more effective strategies.
How is data collected and used in different enterprises?
There is a difference between the desire for data and the maturity with which companies deal with it. There are organizations that consistently leverage their data, and we’re seeing highly functional use cases from them. The strongest, most mature data organizations have strong data governance principles in place and strong have developed data toolsets that deliver a lot of value‒whether it’s automating underwriting decisions, claims adjudication, or enhancing claims decision-making.
We see that the appetite and desire for data is high. But the spectrum of maturity around decision-making is where it needs to catch up with the appetite for data. There is a dramatic difference between the desire for it, and then the decision making and discipline it takes in an organization in order to match the maturity of that data to the desire for it.
Mature organizations are able to augment the data that is presented during the application process with external data in order to make a decision. These organizations are bringing in-line data from non-traditional sources into a decision transaction. Some of these organizations are using that data in a transient way, simply using the data to make a decision, and then disposing of it – finding it easier to not have to deal with the security and storage issues that entail keeping the data on their systems when the use-case only requires a very in-line usage.
Less mature organizations are still using data, however usually only in one-off processes‒such as extracting data from legacy sources without an aggregated picture and applying custom single-use filters to that data to transform it into actionable formats.
What are the branding implications of the way that data is collected and used?
How a company collects information about their customer is important to consider and can be a huge CX pitfall if not done well. Are you asking your customers the same question over and over?
In an Accelerate webinar titled How to Build Data Foundations for a Digital Insurance Future, we described a study which revealed that, in the case of one insurer’s app process, a client’s name and address were asked for 10-12 times from quote to application because of all the disconnected solutions.
As organizations mature, we see the collection and reuse of that data. So, the carrier only needs to ask the customer for information once, which encourages a positive perception of the brand. Having customers think, “I feel like I’ve answered that question before” doesn’t create the best impression of your brand.
Similarly, life insurance new business research conducted by J.D power found that the primary reason for consumers dropping out of the sales process is having to repeat information in the application.
The evolution of the life insurance industry, fueled by the many benefits of digital transformation, will only be as successful as the quality of the data and data practices that drive it. Building a solid data foundation will enable proactive insurers to turn their data into rich sources of customer insight that will enhance CX.