The New Insurance Model

insurance
The New Insurance Model

Make it about me
I know I’m not alone in feeling unimportant when I contact large organisations and find they lack the customer view we’re all being told we can expect in a digital, multichannel age. I have to pro-act to get things done. I have to ask my insurance provider, for example, if my car premium reflects my years of loyalty, or if I’m due a multi-policy discount.

The time has come for insurers to focus on how they use data for true competitive advantage and customer loyalty. In this void, with a lack of tailored service, I will continue to shop around for something better. It doesn’t have to be like this.

Know data – no threat
A new report from KPMG, Transforming Insurance: Securing competitive advantage (download the pdf here) explores the viable use of data for predictable analytics in insurance. The report finds that almost two thirds of insurer respondents to its survey only use analytics for reporting what happened, rather than for driving future customer interactions. This is a process that tends to take place in distinct data silos, focused on an organisation’s internal business divisions, rather than on customer engagements.

The report missed a critical point. The discussion for insurers is not around data analytics – to an extent they do that already. The focus needs to shift quickly to understanding the data they already have and using it to augment their capabilities. ‘Transformation’ is a huge step. ‘Augmentation’ can be embarked on with no delay and at relatively low costs. It will keep insurers ahead of new market threats.

New players have no locked-down idea about how insurance models should work, but they do recognise how to identify customer needs through the data their customers freely provide. Tesco made a smooth transition from Club Card to insurance provider because it had the data necessary to market the propositions its customers needed. It knew a lot about them. What is there to stop other data-driven organisations like Amazon, Google, and Facebook from entering the market? The barrier for entry has never been lower, and those with a data-centric understanding of their customers are poised to scramble over it.

Changing the design point – thinking data first
There is an immediate strategic need for the insurance sector to view data as more than functional – information to define risk categories and set premiums. In the light of competitive threats, the insurance industry has to recognise and harness the business value of the vast amounts of data it has collected and continues to gather. A new design point is needed – one that creates a business architecture which thinks Data First.

To adopt a data first architecture is to augment the capabilities a company already has. The ‘nirvana’ business model for the insurer is to expand customer propositions beyond the individual (party, car, house, health, annuity) to the household (similar profiles, easier profiling). Based on the intelligent use of data, policy-centric grows to customer-centricity, with a viable evolution path to household-centricity, untied to legacy limitations.

Win back the customer
Changing the data architecture is a pragmatic solution to a strategic problem. By putting data first, insurers can find the golden nuggets already sitting in their systems. They can make the connections across each customer’s needs and life-stage. By trusting the data, insurers can elevate the quality of their customer service to a level of real personal care, enabling them to secure the loyalty of their customers before the market starts to rumble as new players make their pitch.

Focusing on a data architecture, the organisation also takes complexity out of the eco-system and creates headroom for innovation – fresh ideas around cross-sell and up-sell, delivering more complete and loyalty-generating service offerings to customers. Loyalty fosters trust, driving stronger relationships between insurer and client.

Insurers have the power – they have the data – to ensure that when next time someone like me makes contact they can impress me, sell me more, make me happier and, above all, make me stay.

Nirvana.

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