This isn’t just about pricing; as an industry we are barely scratching the surface of this massive opportunity.
We are awash in data, and as modern life becomes increasingly connected it is going to quickly turn into an avalanche. Analysis of driving behavior is already challenging the fundamentals of insurance pricing, and that is just the tip of the proverbial iceberg.
The questions that the industry needs to answer today are both simple and complicated:
See also: Cybersecurity Holes in Connected Cars
- How do we take full advantage of all the data and related insights?
- Why haven’t we reached the scale in market that has been predicted?
- What have been the challenges?
In my view, there are five fundamental steps that need to be studied and addressed for an organization to take full advantage of the myriad opportunities that have been created by this era of connectivity.
See also: Why Connected Cars Are So Vulnerable
- Capture and store individual driving data: Of course, it all starts with the capture of data -- that's fundamental. While data makes up less than 20% of the entire effort, if you begin with high-quality components, the opportunity for success is limitless. Well-sourced data provides a foundation to better understand your customers and how you can help. Using that level of meaningful data, you can better price your products, deepen engagement with consumers and improve both your economics and your customers’ overall satisfaction with the claims process. In today’s ecosystem, there is both high-quality, granular data as well as the ability to tap into the many data sources that exist.
- Predict individual driver risk and future losses: We are in the business of insurance. We are responsible for both understanding and predicting the behaviors that cause accidents as well as the expected costs of loss that are incurred. This is no small task. It requires models that leverage telematics data and loss data. This kind of meaningful data must be sourced from the same time period, so our models can identify the driving behaviors that are causing those accidents, as well as the costs of each incident.
- Streamline rating and program operations: Your rating and program operations need to be refined, streamlined and optimized for a different environment -- this is a new era. You must know when and why there are issues with your customers and address them appropriately and quickly. These programs must be properly managed. You need to clearly and consistently communicate with your agents, stakeholders and partners, as well as your consumers, especially as your program grows.
- Optimize driver safety and improve driving experiences: The feedback from long-term, trusted partners as well as from your customers can offer early indications that provide the guidance needed to create or expand a successful new service. To make each driver safer, while improving the driving experience, you must learn and respond to what the consumer data is telling you, specifically the trends of value that provide real insight. Dig in and leverage consumer research, listen to the customer -- specifically what they like and don’t like – and, above all, pay attention to the user interface. Whether that’s the expansion of a new offering or deep-sixing a new product capability, you need to be willing to change and adapt your vision to the qualitative and quantitative feedback.
- Uncover deeper insights: This isn’t just about pricing; as an industry we are barely scratching the surface of this massive opportunity. It’s important to look for opportunities that will move this effort beyond pricing. Analyze the data itself, as well as the feedback from your customers, to anticipate what the customer is going to want in the future and how the data can optimize your business. Use the data to transform your claims process, provide incentives for better driver behavior and identify fraud before it happens. This kind of approach will lead to more of your customers appreciating and valuing your brand approach.
We have spent a tremendous amount of time and resources trying to anticipate exactly how much this industry will really be disrupted. We can no longer rely on our old-school approaches or the reliable case studies we were taught in business school. I urge everyone to not just consider how this industry might change at the macro level. This isn’t black and white – this requires a nuanced quantitative and qualitative approach. I believe that almost all our processes will be disrupted, fueled by greater connectivity and changes in consumer mobility. It is time to get to work.