The following opinion article is written by Mark Lusted, MD at Dock9
For those insurers considering using big data, Facebook’s recent block of an insurer will probably have left you in an awkward position. The scandal left customers creeped out, angry and wary.
As with anything new, businesses move much faster than regulators do. So it’s down to insurers to turn this situation around. To do so they have to be upfront with consumers that there are risks involved, but remain open about how they plan on using their data - leaving no room for doubt. Insurers must also reassure customers that the benefits, such as offering customers customised experiences, outweigh the negatives.
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To my mind, there are three key benefits of utilising big data in insurance that are worth outlining to customers and internal teams. These are the ability to personalise experiences and policies, more opportunities and potential incentives.
Big data can help insurers tap into what many eCommerce have been doing for years: personalising customer experiences. It will allow insurers to create tailored policies for each individual customer, rather than for a generic profile. Insurers with a 360-degree view of their customer will be able to predict their behaviour and make risk recommendations on that basis – leading to greater customer satisfaction and potentially lower premiums.
Insurers that use big data to simplify the customer experience will succeed. It’s a hugely competitive market. Saving just a few clicks can be the difference between converting a customer and missing out.
Using big data will also allow insurers to develop new products, for instance, on-demand insurance, which will transform the way insurers interact with people. This will be especially critical in appeasing the new generation of consumers - the millennials - who are used to everything being on-demand, it only makes sense for the insurance sector to follow in line with many other industries.
Insurers harnessing big data isn’t something new either. It’s been a priority for insurers for some time. For instance, back in March Teradata commissioned research that found 82% of insurance companies, with more than C$800 million turnover, are prioritising big data strategies in 2016. Now is the time for smaller insurance firms get in on the action, to avoid being left behind.
A lot of people are criticising big data because it will allow insurers to spy on consumers and penalise mistakes. However, what a lot of people are forgetting to remember is that it will also be a chance to reward good behaviour by lowering premiums and making society safer. It will result in pricing becoming linked to people’s behaviour and actions, rather than generic broader underwriting.
Many car insurers already offer discounted premiums to drivers willing to share telematics data from a black box installed in a car, or more commonly now through an app. This means safe drivers aren’t being penalised for the actions of a minority. Currently, this is voluntary, so consumers who consider themselves ‘good drivers’ can opt-in to receive this benefit. However, fast forward 10-15 years, and it is likely all cars will feature some form of driver analysis software as a default.
Insurers must remember that personal data is something consumers take seriously and value greatly. However, essentially, it boils down to one question: wouldn’t every consumer benefit from more accurately assessed risks?
If you were to ask customers this question, I’m sure the majority would answer yes.
The preceding opinion article was written by Mark Lusted, MD at Dock9. The views expressed within the article are not necessarily those of Insurance Business.