July 29, 2016
The Insurance Renaissance, Part 5
by Denise Garth
How will insurers, as a part of the Insurance Renaissance, capture reality and put it to good use? Let’s look at six areas.
A Thirst for Reality
Today’s Insurance Renaissance shares one very clear trait with the Renaissance of the 1400s — in both cultures we find the thirst for reality. If you look at the paintings of Jan Van Eyck or the sculptures of Donatello, you see a cultural wave influenced by the desire to see and know reality and portray it. Leonardo Da Vinci wrote about the change. When he described the art of Giotto di Bondone, his predecessor, he said, “Giotto appeared, and drew what he saw.” That was the beginning of a shift toward “real” pictures of people painted in the right perspectives, colors and tones.
The insurance industry has always understood this craving for reality. In order to know and understand, they must first see clearly. The concept hasn’t changed much, but the tools and dimensions of perception have certainly changed. We hone our tools (software and hardware), find the right paints (data streams, sensors, evidence providers) and practice at producing the correct colors and tones (analytics, product development, marketing messages). But the questions of reality and where an insurer fits into the current market are complex. When it comes to prioritizing, it seems that the “thirstiest” areas hold the most promise for technology’s answers. You could make a long list of how our organizations are now thirsty, but here are a few examples.
- We need new products that meet new market needs and customer expectations
- We want data to uncover new risk areas and improve risk selection
- We want predictions of customer trends to build appropriate channels and products
- We need to become digitally enabled
- We need to transform claims management … and eliminate or reduce claims proactively with customers
- We need to grow analytic capability to well beyond operational effectiveness
So how will insurers, as a part of the Insurance Renaissance, capture reality and put it to good use? Let’s look at six areas in particular.
New Products – Meeting an Unfolding New Market
With the emergence of new technologies, new demographics and the falling of industry boundaries, we are seeing the growing demand for new, innovative and (in many cases) personalized insurance products than ever before. These range from products focused on the “on demand” economy, to new risks such as cyber and new needs for the sharing economy. All of these are unleashing a demand for innovation, simplification, and in some cases unbundling of the insurance risk to meet very different demands and expectations. Insurers need to capitalize on these opportunities to seize new markets and gain competitive advantage to drive revenue and profitability.
Risk Selection — From Answers to Eyes
The Internet of Things (IoT) from the connected car to the connected home, wearables for healthy living and more has given eyes to risk. For years, a commercial insurer would have to rely upon answers to questionnaires, claims experience and all of the numbers associated with insuring a business risk. Now sensors, drones, cameras and satellites are capturing not just real data, but real images. All of these efforts represent greater control and decision capabilities for insurers whose systems are prepared to use them.
Customer Profiles — Getting to Know Them
Who are we insuring? For centuries, insurers never truly know their insureds. Now, they can, leveraging real-time feedback on their day-to-day living, driving, exercise and travel. Technology has advanced far enough that artificial intelligence (AI) and demographic profiling can potentially recognize risk patterns that policyholders don’t recognize themselves. The additional consumer knowledge will contribute to additional, valid, automated decisions, streamlining the process. Automated decisions will contribute to flipping the insurance model upside down and beginning to focus heavily upon prevention.
See also: Data Science: Methods Matter
Digital Readiness — Bringing the Pictures Home
Insurers are now beginning to rely upon the tools that consumers wear, the devices they carry with them and their desire to do business where they are, at times that are convenient for them. Consider this: The consumer is actually the one paying for the equipment that the insurer is using to foster the relationship AND track lifestyle. Every digital interaction between the insurer and the consumer is a teachable moment for the insurer — but only if the insurer is digitally prepared and developing an omni-channel presence. So, if the insurer will simply “go half way” and provide the back-end platform, the consumer will provide the front-end communication devices, the telematic sensors and the location data. To bring this back to our analogy, it is the insurer prepping the canvas and the policyholder painting a self-portrait. That’s a real, modern, Insurance Renaissance concept. But insurers can’t tap into free portraits without providing the canvases.
In many cases, now that greenfields, startups and aggregators are filling information gaps and now that companies such as Majesco are providing cloud-based platforms, an insurer doesn’t even need to make a tremendous upfront investment to become digitally prepared. It simply needs to have the desire to capture opportunities and a willingness to modify business models. It is the thirst that matters.
See also: How to Plant in the Greenfields
Claims Transformation – From Payout to Prevention and Elimination
In today’s fast paced world of disruption and transformation, the management of claims is increasingly complex, challenging and in a constant state of flux. Insurers who want to deliver a new level of customer experience to compete, must move beyond efficiencies, cost reduction and claims payment to innovating the claims process to enhance the customer relationship and to prevent or eliminate claims using new technologies. The response to potential and actual catastrophic events is proactive, with a focus on saving lives, minimizing or eliminating damage (think about an alert for a severe thunderstorm with hail to get a car under cover) and to provide customers a feeling of personalized care.
Analytic Capability — Making the Invisible Visible
Trends will always be with us. They may annoy us with their persistence, but if there were no such thing as trends, there would be far fewer opportunities for competitive growth. It doesn’t matter if trends are demographic, operational, economic or atmospheric…we know more when we see trends clearly.
Analytics is like a periscope that reaches up out of the depths of the home office and views the landscape, allowing us to make the decisions that will keep us on course. Today’s analytics are far more precise (and fast) than they used to be, so our virtual picture can be strikingly close to reality. Analytic answers color in our blind spots, bringing light to areas where we have traditionally been in the dark. It adds a new dimension to our decisions and also allows for improved experimentation and testing.
The Insurance Renaissance — Front Row vs. On Stage
Of course, the end of all of this improved observation isn’t just a better picture of reality. If that were the case, insurers could be content to sit and watch. The end result of the clear picture must be an active performance based upon perpetual observation. The industry will reward the players, not the spectators. For those who are watching — the pundits, the experts, the researchers and the industry — they are likely to see that the thirst for reality is simply a small step in a gigantic shift from a focus on indemnity to a focus on prevention. Someday, perhaps, prospects will search for companies with the fewest claims — knowing that those insurers are the ones who actively turn their knowledge of reality into increased safety, reduced loss and improved lives.