Tag Archives: insurance premium

Cyber, Tech Security Start to Merge

A convergence between the cyber insurance and tech security sectors is fast gaining momentum.

If this trend accelerates, it could help commercial cyber liability policies create a fresh wellspring of insurance premiums, just as life insurance caught on in the 1800s and auto policies took off in the 1900s.

The drivers of change are substantive. As companies scramble to mitigate risks posed by steadily worsening cyber threats, insurers and underwriters are hustling to meet overheated demand for cyber liability coverage. The cyber insurance market expanded by roughly 60% from 2014-15, topping about $3 billion last year. ABI Research sees no slowing of that breakneck growth rate and estimates the global cyber insurance market will top $10 billion by 2020.

However, for that projection to be realized, the insurance sector must somehow attain the capacity to build reliable actuarial tables that are fundamental to any type of insurance sales. Trouble is, gauging a company’s security posture has turned out to be a much more complex endeavor than anything the insurance industry has mastered before — such as assessing human life expectancy or calculating how much risk to assign a particular driver.

There is endless network traffic data, to be sure. But, at present, there is no efficient means to bring it to bear. And to complicate things, companies fear bad publicity and often vigorously resist sharing the type of valuable attack intelligence needed to calculate risk profiles.

See Also: IRS Is Stepping Up Anti-Fraud Measures

“It’s the wild, wild West,” says Mike Patterson, vice president of strategy at Rook Security. “Everyone is jumping in the market chasing premiums, and they are doing it without a full understanding of the risk involvement, from an underwriting perspective.”

Enter the burgeoning tech security sector. Security vendors supply some $75 billion of security hardware, software and services annually. And with cyber threats continuing to intensify, tech security is on track to continue growing at an estimated 5% to 12% annual rate over the next few years.

As security vendors develop and deliver more sophisticated prevention and detection technologies, they are amassing larger, richer data sets about the resiliency of company networks. It seems obvious to some, but the accelerating convergence of insurance and security is inevitable.

“Underwriters are really trying to figure out how to quantify the risks of the policies they’re underwriting,” says Craig Hinkley, CEO of web application security vendor WhiteHat Security. “We’ve been researching our customers’ websites and web applications for 15 years, so we’re actually swimming in actuarial data right now.”

Models to watch

The questions of the moment: Who will be the early adopters?; and which collaborations will emerge as enduring models? ThirdCertainty interviewed a handful of tech security vendors at the giant RSA cybersecurity conference in San Francisco in March that are testing the waters. Here is a rundown on three of them:

WhiteHat Security

WhiteHat recently struck a partnership with Franchise Perils, an insurer of online retail websites —Franchise Perils will contribute toward the purchase of WhiteHat’s flagship service, Sentinel, for any online retailer purchasing a cyber policy. This amounts to a steep discount, enticing clients to use WhiteHat’s cutting-edge technology.

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Craig Hinkley, WhiteHat Security CEO

Part of WhiteHat’s services include helping corporate clients test their digital defenses with a small army of ethical hackers who “attack” the company and expose weaknesses. If a company quickly fixes its vulnerabilities, WhiteHat will give it a higher score in its WhiteHat Security Index, ranging from 0 to 800 — similar to a credit rating for consumers.

“That translates into a safer, more secure website and web application, which reduces the probably of you being hacked,” Hinkley says. “And that’s exactly what underwriters need to know for cyber insurance policies.”

For businesses that fix their vulnerabilities, WhiteHat guarantees the companies will not get hacked. If they do get hacked, WhiteHat will pay as much as $500,000 in remediation costs for the data breach.

FourV Systems

This start-up has just introduced an innovative threat intelligence monitoring and security posture scoring system aimed, for the moment, mainly at large enterprises in financial services, healthcare and government.

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Casey Corcoran, FourV Systems vice president of strategy

FourV’s goal is to enable a large retailer or bank to monitor the status of its network security day-to-day, or even hour-to-hour, much as a business routinely tracks daily sales, says Casey Corcoran, vice president of strategy at FourV.

“You could tell by noon whether the pattern that you’re seeing in your risk is shaping up properly for that day of the week,” says Corcoran, a former tech executive at Jos A. Bank Clothiers. “If it’s not, you can fix it.”

FourV CEO Derek Gabbard foresees a day in the not-too-distant future when a senior executive will wake up in the morning, glance at her Apple watch and use a FourV app to check the company’s security risk index.

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Derek Gabbard, FourV Systems CEO

The idea is to create “risk discussions that are nontechnical, easy-to-understand and jargon-less for the leadership team,” Gabbard says, “so that they have confidence in the work that the chief information security officer and his teams are doing.”

Once FourV gets some traction and amasses large enough data sets, it expects to be able to see — and eventually to be able to predict — risk patterns in vertical industries. Such analysis should be very useful in building actuarial tables, Gabbard told ThirdCertainty. The company already has begun brainstorming how it might go about selling that data directly to the insurance industry, perhaps even by developing a dashboard customized for underwriters.

Rook Security

This tech security vendor supplies managed security services and does forensics investigations of network breaches. Rook investigators respond like a cyber SWAT team to all types of cyber threats, whether that may be a minor data breach that is easily fixed or a deadly cyber attack that requires teams of cyber investigators to jet around the globe.

Listen to a podcast: Drivers behind the rise of cyber insurance

Communication surrounding cyber attacks can be messy and full of mistakes that worsen the damage, according to J.J. Thompson, Rook’s CEO. So Rook’s new War Room app has set up a digital command center for tech and security teams to monitor attacks and to respond swiftly.

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Mike Patterson, vice president of strategy, Rook Security

Whether Rook arrives before or after a breach, it quickly gets an inside look at the state of network security. Mike Patterson, Rook’s vice president of strategy, told ThirdCertainty that the readiness of companies varies widely. Some companies boast strong security staffs, resources and planning, while others only have one or two full-time security people — or none at all.

“Not everyone is as prepared as they should be,” Patterson says. “But that’s changing, with much more awareness now on the importance of security and taking care of your data.”

Rook is seeking to be the default option — brought in by the insurer — for post-breach incident response and forensics. It is also looking to provide a service where Rook would be retained by a company to come in and improve security postures so the client qualifies for cyber coverage or gets better pricing.

“It’s a really good opportunity to go shopping for cyber insurance because you’re going to get great rates, and everyone is going to be a little bit slack on the writing terms because they want that business,” Patterson says.

ThirdCertainty’s Edward Iwata contributed to this story.

A Word With Shefi: Inoma at WeSavvy

This is part of a series of interviews by Shefi Ben Hutta with insurance practitioners who bring an interesting perspective to their work and to the industry as a whole. Here, she speaks with Hesus Inoma at WeSavvy.

Describe WeSavvy in 50 words or fewer:

WeSavvy is a digital insurance platform that gives customers cash back on their insurance premiums when they walk, run or cycle. WeSavvy’s mission is to give back customers control over their insurance premiums.

Why WeSavvy?

We believe the current insurance model is broken. We need to shift the current model from one of indemnification (payout in the event of a claim) to one of loss prevention and control. This can only be achieved by changing the current industry model from one that penalizes to one that rewards the customers for positive behaviors. If we take the healthcare industry in the U.S. as an example, between 2010 and 2015 premiums have increased by more than 26%, leaving customers completely powerless and at the mercy of year-on-year increases. WeSavvy showcases a better way to transform the healthcare insurance industry, by giving the customer full control of healthcare expenses.

How did you decide to pursue the idea of WeSavvy?

I’m passionate about the digitalization of insurance, yet WeSavvy is personal to me. Back in 2012, I was overweight, and my 2013 New Year’s resolution was to lose weight. I unleashed the power of my community to support me through my journey, and I successfully lost weight throughout 2013 and became very healthy. However, my health insurance premiums went up in 2014, and there was no way for me to effectively communicate my personal journey to my insurer. That’s when I decided, in late 2014, to quit my job and build WeSavvy, a platform that grants the insurer the ability to personalize quotes and empower policyholders to gain back control over insurance premiums.

What’s in a name?

I wanted a name that reflects our core beliefs that “We” as a community [friends, family, network] can leverage technology and be “Savvy” tackling the obstacles placed in front of us in relation to insurance.

Describe your typical client:

In everything we do at WeSavvy, we keep the policyholder [our end customer] in mind. Our current business model is B2B2C [business to business to consumer], where we leverage current networks present within the insurance industry to reach the policyholder. Our clients are insurers and agents looking to meet the expectations of the next generation of customers, whether millennials or digital natives.

What does competition look like?

We’re often compared to Vitality. The difference between WeSavvy and Vitality is the tangibility of our rewards mechanism. We want to ensure customers receive tangible rewards, which increases their disposable income. Vitality’s main focus is the insurer, and [Vitality has] partnered exclusively with one insurer in every new market it has entered. What happens to the other insurers and agents? Our focus is to service the market as a whole and all participants of that market. Our technology will be available to every insurer or agency that would like to better serve its customers. We will leave our user experience for another day!

You took part in the Deloitte Digital Disruptor; what did you learn? 

The biggest lesson I’ve learned was that the industry wants to embrace innovation, but, at times, the internal infrastructure and culture is not there to move at a pace of a start-up. Insurers that create the internal infrastructure and culture to move at the required pace will be the ones that reap the biggest rewards.

You’re currently taking part in the Global Insurance Accelerator; lesson learned?

We’ve perceive the main insurance hubs as being London and New York, and it turns out that Des Moines is a hidden gem for our market. The concentration of insurance companies in Des Moines is mind-blowing. Des Moines is truly “Kicking ass, taking names and selling insurance” [to quote the city’s slogan]. I’d advise any insurance company that is thinking of setting up an innovation lab or is looking to work with start-ups to reach out to Brian Hemesath and see what he has created here. The conditions for a start-up to succeed are truly embedded in this 100-day program.

Where do you see WeSavvy in five years?

WeSavvy will be the catalyst in transforming how the insurance industry is perceived. Insurance is an awesome product, but it has failed to communicate its true value to the customer. Insurance is one of the best mechanisms of risk transfer, and it forms the bedrock of every developed society. I see WeSavvy growing from strength to strength, year on year, and moving into other insurance products, which have failed to engage and resonate with the customers. We have no exit strategy, for the simple reason that, if I exited from WeSavvy, my next venture would still be in insurance; and I love what WeSavvy as a company stands for: personal and social empowerment. You never know, we might IPO one day!

Best life lesson:

“Your Health is your wealth” is one of my best lessons as it taught me [after my mother passed away for cancer] that if there’s anything we could do to extend our time with our loved ones in this life, we should do it!

To see more of the “A Word With Shefi” series, visit her thought leader profile. To subscribe to her free newsletter, “Insurance Entertainment,” click here.

Better Way to Assess Cyber Risks?

As the saying goes, there are two kinds of motorcyclists: Those who have fallen off their bikes and those who will.

The insurance industry assesses the corporate world’s cybersecurity risk much the same way. Everyone is equally at risk, and, therefore, everyone pays the price for higher insurance premiums.

Not a day seems to go by without news of a high-profile security breach. It’s no surprise, then, that the cybersecurity insurance market is expected to rise to $7.5 billion by 2020, according to PwC. Even worse, the industry does not have effective actuarial models for corporate cybersecurity, say Mike Baukes and Alan Sharp-Paul, the co-founders and co-CEOs of UpGuard.

The two audacious Australians have developed what they say is a better way to assess the risk for cybersecurity breaches.

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Alan Sharp-Paul (L) and Mike Baukes (R), Co-Founders and CO-CEOs, UpGuard

The pair’s company recently unveiled its Cybersecurity Threat Assessment Rating (CSTAR), the industry’s first cybersecurity preparedness score for businesses. UpGuard’s CSTAR ranking is a FICO-like score that allows businesses to measurably understand the risk of data breaches and unplanned outages because of misconfigurations and software vulnerabilities, while also offering insurance carriers a new standard by which to more effectively assess risk and compliance profiles.

According to Baukes and Sharp-Paul, many companies forego available policies due to perceived high cost and uncertainty that their organizations will suffer an attack. With countless patches and endpoint fixes slapped onto IT infrastructure to hastily remediate breaches, companies have found themselves with less visibility into their core systems than ever before and, as a result, no way to understand how at-risk they are for hacks. With CSTAR, businesses are able to regain transparency into their own stack and take the appropriate steps to bolster their cybersecurity. Insurance carriers, meanwhile, can make smarter underwriting decisions while accelerating the availability of comprehensive and cost-effective cybersecurity insurance policies for businesses. It’s a win-win for both the insurance industry and for businesses.

After spending years in financial services in Australia and the U.K. and witnessing the disarray of corporate IT, Up-Guard’s two co-founders decided they could make a difference by developing a better way for corporations to understand their software portfolios and their associated potential risk for security breaches. Baukes says, “Our experience showed that that there were thousands of applications and thousands of machines powering all of this critical infrastructure. And the thing that we learned throughout all this was just how hard it is for an IT organization to understand and get a handle on what they’ve got.”

“Today, everything is out in the cloud,” Sharp-Paul says. “We’re all more connected. Employees are connected 24 hours a day, seven days a week. Now what keeps CIOs and CEOs up at night is, ‘If we get breached, I could get thrown in jail. I could get sued.’ It’s a very, very different world we live in today. We built a system to help companies understand and prevent downtime, and helping them save on project costs is just as relevant today from a security perspective.”

The two initially started a consulting company to help companies catalogue and manage their software platforms and applications. According to Sharp-Paul, “We realized the biggest problem companies have from an IT perspective is that they don’t really have appropriate visibility into what they’ve got and how it’s changing because so many things are changing daily in these environments that it’s really hard for them to know what ‘good’ looks like.”

Sharp-Paul and Baukes’s consulting led them to develop software to automate the process, providing the means to quickly and effectively crawl every server and software application to present a profile of what needed to be updated or patched and to identify the system holes that allowed for security breaches.

As Baukes tells it, “Getting that all to mix well and be safe, secure and capable of pinpointing where problems go wrong really quickly is an incredibly difficult task. So, we built up the first commercial version of the product—a very rudimentary version—and we shopped it around, and people were very excited at the time.”

From there, the pair realized their software had commercial potential and implications more far-reaching than what they had first thought. “We started with that very simple version with a few sales and no sales force—just Alan and [me] at the time—growing to the point now where we now have 3,000-plus customers, and the team is steadily being built,” Baukes says.

Now, the company has nearly 50 employees and is growing fast. The Mountain View, CA–based company attracted early seed funding from the likes of Peter Thiel, Dave McClure and Scott Petry, leading to a near $9 million Series A funding underwritten by August Capital.

The co-CEOs admit the co-managing arrangement is unconventional and would be challenging to make work under different circumstances. However, Baukes and Sharp-Paul feel their skills and temperament complement each other.

“To be honest, when people ask us about it, my first response is always that it’s a terrible idea,” Sharp-Paul says. “And that’s not because it’s been a horrible experience for us. It’s because I kind of think we’re really the exception. And the only reason I say that is that I know the unique things we went through and the type of people we are that makes this work. I can’t imagine that being a common thing at all.”

Baukes is generally a more aggressive and strategic thinker, while Sharp-Paul describes himself as more pragmatic and conservative.

Sharp-Paul and Baukes first worked together at the Colonial First State Investment firm back in Sydney, where the two lived the DevOps experience before DevOps became the buzzy concept that it is today. There, Sharp-Paul was a web developer, and Baukes was a systems administrator, and they talked a lot about things like continuous integration and continuous delivery.

“Now these are all fantastic things,” Sharp-Paul says. “But you need a foundation or a basis of understanding what you have. I mean, we like to say you can’t automate what you don’t understand. Or you can’t secure or fix what you don’t understand. And that’s always missing. Everyone’s trying to rush to this goal of DevOps or moving to the cloud. Everyone wanted to be there, but companies and vendors in particular weren’t helping businesses on the journey there.”

Baukes says, “Once you have that base understanding of what you have, then that opens everything else up. You can think about DevOps. You can think about automation. At the time, we were thinking, ‘Why hasn’t anyone thought to do this before?’ It seemed like such a foundational, basic thing. It was almost like it was so foundational that everyone just moved past it, and they were looking at the next shiny thing down the road. I think that was the white space. That was our opportunity. We jumped on it.”

As it turns out, in the world of corporate IT, applications never get retired. Even worse, the people who manage them move on because the life cycle of an employee at a company is short. As as result, the institutional knowledge about these applications is lost.

“Corporate memory is so short typically,” Sharp-Paul says. “They often get to this point five years down the track where they rediscover this server or this application, and everyone’s too scared to touch it because they don’t know what it does. They don’t know how it works. The people with the knowledge just left with it all in their heads. We come across that all the time.”

Sharp-Paul and Baukes had always seemed destined to do something on their own.

“I always had a healthy disrespect for authority. Throughout my corporate life, I was looking outside to see what else is [WAS?] out there,” Sharp-Paul says. “I actually started the first step of creating a business on my own—with something as mundane as a French language website that I used when I moved overseas for a couple of years. … It taught me that I can actually build something myself that makes money.”

Baukes agrees.

“The big difference is that I grew up in an immigrant family in the middle of nowhere, effectively. I won’t say the Australian Outback, but really rural,” he says. “We built everything ourselves. My father was a great wheeler and dealer. So, I learned a lot of from him. I fell into all of this by playing computer games and was really good at it, frankly. For me, that was a springboard into an accidental corporate life. I always knew that I would do something else.”

Now, for the future?

Baukes says, “It makes good business sense to quantify the risk in your company’s IT systems and report it effectively. And I think that for us, we could continue growing our business with that in mind—giving people visibility, helping them get to the truth of what they’ve got, teaching them how to configure it, and showing them if they’re vulnerable. That is beginning to accelerate for us, and we’re incredibly proud of that.

“We truly believe that, over time, CSTAR will be adopted as an industry standard that companies and carriers alike can rely on to make critical coverage and cybersecurity decisions.”

2016 Latin America Insurance Outlook

Despite sluggish economic growth and troubling inflation in key markets, the 2016 insurance market outlook for Latin America remains relatively bright. The rollout of new insurance products and distribution approaches at a time of low market penetration should drive strong growth for insurers. Insurance premium growth is expected to rise by around 6% to 7% in 2016 and possibly beyond should the economic environment improve as expected. At the same time, the emergence of end-to-end digital capabilities is transforming the Latin American insurance market. This digital market disruption will force insurers to make rapid revisions to existing business models to stay competitive and build market share.

Customer expectations rising

Commercial customers will continue to require more sophisticated insurance solutions in 2016, including coverage for business interruption, cyber security, civil unrest and errors and omissions. Latin American consumers, many of whom are young, cosmopolitan and tech-savvy, will continue to push for new insurance channels and services that fit their lifestyle. To respond, insurers will need to simplify and adapt products for Millennials and sharpen their focus on mobile and social media interactions. Evolving customer needs throughout the region are compelling insurance companies to rethink their strategies, processes and services. The rise of financial technology, or fintech, companies is causing insurers, particularly in the consumer insurance sector, to reconsider their business models and increase their investment in new digital technologies. Despite a desire to avoid conflicts with legacy models, insurers realize that flexibility, efficiency and innovation are critical for success in a more demanding marketplace

Competition heating up

The liberalization of industry regulation across Latin America has opened insurance markets to wider competition. The abundance of insurance capital has intensified competition from various directions: from global insurers seeking a foothold in the region to local insurers looking to expand cross country to entrenched insurers defending their turf. These competitive trends are keeping insurance rates flat through much of the region and, in some cases, pushing them lower. The most substantial rate decreases have been in non-catastrophe property.

Pockets of premium increases can be found in areas of instability, such as Venezuela. However, insurance capacity is very limited for Venezuelan political risk, with most risks dependent on the international reinsurance market.

As markets develop in Latin America, commercial demand is increasing for new forms of insurance coverage, such as environmental liability. The opening of the oil industry to the private sector in Mexico, for example, is exposing new oil exploration and production entrants to potential losses from environmental damages. But market capacity is still restrained in key markets, such as Brazil, where only a few insurers offer such liability coverage.

Read our Market Outlook for LATAM Insurance in 2016 to understand more about the dynamics facing the South America Market here.

Capturing Hearts and Minds

This article is an excerpt from a white paper, “Capturing Hearts, Minds and Market Share: How Connected Insurers Are Improving Customer Retention.” In addition to the material covered here, the white paper includes specific recommendations on how to improve retention.

To download it, click here.

Insurers currently operate in a challenging environment. On the financial side, premiums are stagnant and interest rates low, and many cost-cutting measures have already been enacted. On the other hand, customer empowerment is growing. Customers are finding the information and offers they need to switch providers more freely than in the past – customers whom insurers can ill afford to lose.

For many carriers, the key to preserving customer relationships still lies in personal interaction, executed through traditional distribution and service models with tied agents and brokers. For some customer sets – those who strongly favor personal interaction – this business model works well. Yet a growing segment of customers, especially those 30 years old and younger, differ in some key aspects. While they still look for help and advice, they seek personal contact in the context of a holistic, omni-channel experience; they communicate and find information whenever, wherever and however they want. And even traditional customers appreciate if their agents have broader and faster access to the information and specialists they need on a case-by-case basis.

How can insurers keep – and even expand – these diverse customer sets, old and young alike? What factors drive retention and loyalty? To explore these questions, we surveyed more than 12,000 insurance customers in 24 nations about relationships with their insurers, what they perceive as valuable and in what ways they would like to interact and obtain new services going forward.

We found that while insurers understand well how to cover risks, they often fail to engage their customers on an individual basis. Even though insurance is complex, customers want to be involved, emotionally and rationally. When insurers act on this knowledge, customer share can rise.


The churn challenge

As a rule of thumb, the cost of acquiring new customers is four times that of retaining existing ones. To grow market share, insurers need new customers. But for the balance sheet, retention has a much larger impact.

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For a long time, the insurance industry did not consider this lack of trust a problem. In the highly asymmetrical pre-Internet world, there was a necessary gatekeeper to information and knowledge about risks and coverages: the insurance intermediary. For insurers, the intermediary’s trusted personal customer relationship was a guarantee of fairly reliable renewals and low customer churn – thus, keeping the most profitable customers.

The technological innovations of the digital age have altered this picture. Information asymmetry is diminishing. Although many customers still seek advice on insurance matters, the empowered digital customer does not need to rely solely on the gatekeepers of old for information. With communication being swift and ubiquitous, misinformation is quickly uncovered, leading to a steady erosion of trust, even with the personal adviser and insurer.

We have come to expect that only 43% of our survey respondents trust the insurance industry in general – a number that has stayed fairly stable since our first survey in 2007 – but only 37% trust their own insurers to a high or very high degree. Most customers are neutral, with 16% actually distrusting their providers.

As we have often seen in past studies, trust varies widely by market and culture. For example, only 12% of South Korean customers responded that they trust their insurers, compared with 26% in France, 43% in the U.S. and 51% in Mexico.

Low trust translates to high churn. Even though 93% of our respondents state that they plan to stay with their current insurers for their recently acquired coverage through 2015, almost a third came to that coverage by switching insurers. Why? Most commonly (for 41% of respondents), their old insurers couldn’t meet their changing needs (see Figure 1).

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The pattern of increasing customer empowerment and decreasing information asymmetry is continuing. New and non-traditional entrants to the insurance market are taking advantage of the opportunities of digital technologies. For example, Google recently launched an insurance comparison site for California and other regions of the U.S. This presents a real threat to both online insurers and traditional providers – not because of the comparison option itself, but because Google has collected a huge amount of information about each individual through his or her surfing habits, thus allowing better personalization and higher-value offers.

The three dimensions of retention

What do insurers need to do to increase trust and customer retention with the intent of improving both the top and bottom lines? The findings of our survey point to three courses of action:

    • Know your customers better. Customer behavior is affected by experiences and underlying psychographic factors. Insurers need to know and understand customers better, not only as target groups but as individuals. Insurers also need to get their customers involved, rationally and emotionally.
    • Offer customer value. As overused as the term is, a strong and individualized value proposition is exactly what insurers need to provide to their customers. Value is more than price; it includes many factors, including quality, brand and transparency.
    • Fully engage your customers across access points. As Millennials become a significant part of the insurance market, speed and breadth of access has begun to matter much more than in the past. Insurers need to engage their customers as widely as possible, from in-person interactions at one extreme all the way to digital interaction models such as those made possible by the Internet of Things.

Customer perception and behavior

Ever since the Internet has become a viable way to shop for goods and services, much discussion has centered on the matter of price. In theory, insurance products are easy to compare, so shouldn’t the cheapest one win out?

This view assumes that, aside from the price, all else is equal. If that were true, price would indeed be the sole tie-breaker. In reality, though, all else is never equal. Insurance is a product based on trust, for which perception matters. Perception, and thus customer behavior, is shaped by the individual customer’s attitudes and experiences. Understanding a customer on an individual basis helps a carrier tailor these experiences by communicating the “right way.”

To classify our respondents according to their attitudes, we used the same psychographic segmentation as in previous studies (see Figure 2).

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One size seldom fits all

Overall, our respondents stated that the three most important retention factors are price (63%), quality of service (61%) and past experience (33%) – leading back to the price as the main tie-breaker. Yet a closer look across segments paints a more diverse picture: For a demanding support-seeker, quality is by far the most important (74%), while a loyal quality-seeker bases his renewal intentions on past experience more strongly than any other group (43%).

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Assuming an insurer is targeting all these customer segments, it will need a diverse set of customer communication options, as each segment requires approaches tailored to its specific preferences (see Figure 3). This figure shows the five most-used insurance search options in the three segments where we are seeing the biggest shift among Millennials, who represent future customers.

The power of emotional involvement

Our data show that appropriate communication with customers sets off a positive chain reaction. First, it increased the use of that type of interaction. Customers perceived the interaction as more positive, and ultimately this increased emotional involvement with their providers – the “heart share” of our study title. Finally, emotional involvement is strongly connected to customer loyalty, so increasing involvement from medium to high had a dramatic impact on the loyalty index (see Figure 4).

What is the right way to communicate and increase involvement? As seen in Figure 3, the answer is “It depends,” so there is no one right approach for all customers. But using current technology – specifically, social media analytics – can help insurers improve involvement.

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With this tool, providers can “listen” to various online sources, understand how they are seen by customers, uncover trends and quickly tie this knowledge to specific actions. Providers can combine the findings of social media analytics with psychographic segmentation and an individual customer’s place within the segmentation; the latter gained via more traditional customer analytics. With this customer view, insurers can even go beyond the personalized knowledge their tied agents tend to have: As customer wants and needs change and they articulate it on social channels, insurers will know and can react in close to real time.

Social media analytics

Social media analytics is a set of tools that allow insurers to analyze topics and ideas that are expressed by their actual or potential customers through social media. This can be on an individual basis, or per customer group. Through social media analytics, insurers can apply predictive capabilities to determine overall or individual attitude and behavior patterns, and identify new opportunities.

This article is an excerpt from a white paper, “Capturing Hearts, Minds and Market Share: How Connected Insurers Are Improving Customer Retention.” In addition to the material covered here, the white paper includes specific recommendations on how to improve retention.

To download it, click here.