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Getting the Data Engine Right for Digital Insurance

Andrew Male
Andrew Male

Data is the raw material required to fuel the future of organizations. But without an engine in place, businesses are limited in reach, impact and ability to satisfy changing customer needs and see any return on investment.

Despite collecting a wealth of personal data from customers over the years, insurance firms have struggled with making full use of it to enhance their customer experience efforts. Being data-rich and insight-poor can become a deterrent in the long run to attracting and retaining customers, impacting the bottom line.

For insurers, this has been a systemic issue. Information asymmetry, where customers offer a lot of information for little in return, stems from the industry’s lack of speed in prioritizing the right technology to power their CX engine.

System upgrades and maintenance, along with new system replacement, take up 71 percent of the average budget, while innovation and transformation are allocated only 20 percent, according to financial services research firm Celent.

As with most large-scale transformations, success can take a while to achieve, but time is not a luxury in a fast-moving digital economy. Customer expectations from insurers have shifted and continue to do so, but the insurance experience remains largely unchanged.

As lifestyles change rapidly, customers seek coverage and protection that :

  •  is easily customizable and caters to their needs as well as their loved ones
  •  is meaningful to their daily lives
  •  is available on apps and devices they spend most of their time on
  •  is able to evolve and grow or shrink as their needs change over time

Unfortunately, most insurers today are unable to offer all the above. This is not due to a lack of understanding their customers, but rather they are shackled with old technology that is unable to provide the agility to create data-driven products and experiences on-the-fly.  With the right approach to the data already on hand, insurers can deliver a meaningful, compelling solution. They simply must make better use of data.

Personalization and great customer experiences lead to happy customers, driving greater customer retention, and a positive impact on the bottom line. In fact, a Qualtrics XM Institute survey found that 89 percent of companies that had significantly above average customer experiences performed better financially versus their competitors.

Easier said than done, true. But the good news is that the chances of realizing success grow exponentially if efforts to make good use of data are rooted in answering customer needs by adopting modern technology to enable new product innovation.

Here are four main areas that insurers should structure their data efforts around.

Data for product development

With knowledge gained from previous interactions, both within an insurer and through partners, insurers can create policies that are tailored to the customer and improve the overall experience.

This helps an insurer differentiate itself from competitors by boosting engagement and building relationships based on convenience and ease of insuring oneself, instead of simply competing on price. The opportunity is clear – in Hong Kong, only 9% strongly agree that their insurers offer financial solutions that meet their needs per Publicis Sapient data.

For example, 170-year-old MassMutual’s in-house startup, Haven Life, created a new business processing platform, driven by data science models, to speed up life insurance underwriting.

It analyses health information from an application along with multiple external data sources to approve or reject coverage in a median time of 40 seconds.

No medical exam is needed for these applicants, which dramatically improves the customer experience for purchasing medically underwritten term-life insurance.

Separately, LifeScore Labs, another MassMutual subsidiary, calculates mortality risk based on 49 applicant-specific data points, including a medical exam, and LifeScore Fluidless, which assesses risk by using self-reported applicant information, together with credit and public records.

Data for contextual offerings

Upselling or cross-selling may be among the most obvious improvements that data can enable. These are areas in which insurers need to improve, notwithstanding the concern with handling sensitive customer information. Customers find data-driven customization to be more beneficial. In a Swiss Re study in 2020, 45 percent of respondents in Indonesia agreed with this, though 20 percent found the practice intrusive.

Contextual offerings take personalization to the next level, not just by targeting potential customers on sites and apps they frequent, but by taking the extra step of ensuring the offering is relevant and customized to their need and the context of the app or site. This can only be achieved by a deeper understanding of the customer and analyzing a combination of attributes based on data collected. Through a better understanding of the customer, insurers can improve and position themselves to be with a customer through their life journey, despite some insurance categories being typically low-touch offerings. According to Publicis Sapient data, no more than 2 in 10 SEA insurance customers strongly agree that their insurer helps them reach their financial goals. In Hong Kong, the number drops to a mere 8%.

For example, Manulife retained existing plan members by offering an immersive experience through its outreach efforts. It helped them go beyond financial numbers and engage in a holistic conversation about life stages and related goals. By using the right experience and content to help customers visualize what might be possible in retirement, Manulife’s teams could better engage and retain customers by working towards a future they looked forward to.

Data for distribution

What is the best way to distribute an insurance product in regional markets, especially in digital economies where people are comfortable with buying things via e-commerce sites? Can a direct-to-customer (D2C) approach work?

In many countries, such as Thailand, agents account for a large part of sales. There, for example, 37 percent of respondents in the Publicis Sapient Voice of the Customer (VOC) Survey* conducted in Southeast Asia said they paid for a policy on an insurer’s website while 42 percent did so through an agent.

These survey responses indicate that there is certainly space for a D2C approach to work effectively. After a large insurer in the Nordic region deployed tools for managing sales leakage in customer interaction processes and optimized end-to-end customer journey across channels, distribution and products, it grew its revenue by 5.6 percent year on year. End-to-end journey management of customers, it found, accounted for more than 25 percent of total customer satisfaction.

Insurers with an eye on the future have already started developing D2C models with products designed specifically for online fulfillment and support. However, insurance is a relationship-driven industry, and it would bear well for insurers to consider optimizing the usage of data to improve omni-channel customer interactions and conversions through agents, bancassurance and retail channels.

Meanwhile in South Korea, the largest insurance company, Samsung Life Insurance, used an omni-channel approach to reduce IT costs by $20.8 million over four years and triple its developer productivity. Customer satisfaction innovations from the company received an ever-increasing rating on the National Customer Satisfaction Index (NCSI), claiming first place among competitors for 11 consecutive years.

Many insurers certainly think that partnerships and networks are a way forward to the future of distribution, and the numbers bear this out. A Swiss Re study shows that more than 40 percent of respondents in Indonesia would use OVO, a digital payment service, to buy insurance. In Malaysia, Touch n Go, Shopee and Boost, all digital channels, are popular for paying for insurance.

Insurers must be prepared to engage new digital players and other partners to meet customer requirements that may not be met currently and using data to discover the gaps and filling them is key.

Data for retention

Customers want insurance to be relevant, provide the right coverage when they need it and be rewarded when they use their coverage wisely. Though this sounds simple, fulfilling these requirements is a challenge for any insurer. Fewer than 20% of SEA insurance customers strongly agree that their insurers go above and beyond to serve their needs, according to Publicis Sapient data.

The key here is investing in the smart use of data to improve user experience and retain customers. After all, it’s always believed that it costs five times as much to attract a new customer as to keep an existing one.

In the insurance sector, leaders that have invested in customer experience improvements have also seen an uplift in conversions and retention. At the French insurance cooperative, MMA Group, the Nuance virtual assistant helps website visitors to interact with sales agents to develop tailored quotes for health or auto insurance, proactively or reactively.

Nuance analytics enables the agents to identify likely prospects based on their online behavior, as well as visitors who are likely to abandon the session before asking for a quote.

While the actual policies are written by agents at a physical branch, the online chat sessions have increased MMA’s conversion rate from between six and seven percent to approximately 35 percent, and increased customer satisfaction.

Besides customer experience, scalability and size of your loyalty offering matter as well. Some insurers may consider mergers, acquisitions or partnerships to open new doors and create a more attractive ecosystem. With this, a new system of rewards or new services can be made available to your customers.

Moving on despite challenges

While some areas are clear cut, some of the challenges facing insurers today are deep rooted and require a deeper transformation effort.

Some may have longstanding legacy systems that require an overhaul. Think of outdated underwriting and claims systems, which hold back product development and result in poor customer experience.

Others may suffer from disparate data sets that are held in silos. Yet others may have tried to create large data lakes but ended up with a technically sound project that fails to solve any business problem.

Indeed, there are many different related problems, including the lack of talent and varying regulations surrounding data privacy, which require expertise not just in the IT field but also insurance itself to help solve.

In an industry with such a long history like Insurance, change must be incremental. What insurers can do is start with small steps. Take stock of what they have been working on and evaluate their transformation efforts so far, for starters.

They can first try to understand where they are on the map in terms of digital maturity. Once they understand where they are on a transformation journey, they can turn to the technologies that use data to make a real difference. In other words, build the engine to make use of this “new oil.”

Advanced analytics and personalization may be a way forward. Creating end-to-end customer journey management tools is another. Ensuring data governance is important as well. So is cybersecurity.

There is a long list of action items that can be drawn up for many insurers to improve their use of data. First, though, is acknowledging that having data alone is not enough. It is time to truly harness it to deliver the critical insights and analysis that create genuine impact on the lives of consumers and in return on the bottom line.

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Andrew Male
Andrew Male
Client Partner