Insurance has always been about trust. And in the past, the role of an insurer was clear. Insurers were trusted to honor their commitment to pay, to treat customers fairly and to provide support after an insurable event. The recent influx of available data has complicated the relationship.
Today, access to rich data gives insurers and customers more insight and power. Importantly, it also increases uncertainty regarding the use of that information. The available data, and the analytics that uses it, is granular, personal and streamed in real time. This new dynamic in the industry is changing the nature of the insurance relationship.
Learn more about how the increase in data is forcing insurers to rethink how they manage trust.
The data can be analyzed and used to develop a much broader array of insurance products, including more personalized policies. For example, micro-insurance models can cater policies to change by the moment. A client’s car insurance coverage can vary between when running errands in the morning and when being a chauffeur in the evening. In instances such as this, customers are often willing to give up more personal information if it results in perceived value, such as lower premiums.
But this wealth of personal data has made managing trust a lot more complicated. Insurance companies now are responsible not only for protecting sensitive information from hackers but also making sure it’s used properly. Clients need to be reassured that their personal data won’t be used against them or make their policies more expensive.
When in-car monitoring devices were introduced to improve safety, for example, many young drivers rejected the technology because of worries that their driving habits would influence their rates. Similar concerns could emerge if health insurers start to collect data from personal devices.
Insurers also have to wrestle with just how far their responsibilities go. What responsibility do insurers have to reduce predictable risk? Is there an ethical duty to tell a driver to slow down? Or is this an interference of privacy? How can we bridge the gap between legal responsibility and ethical expectations?
The digital age has changed the whole concept of insurance. Predicting risk has become so sophisticated that insurers can now focus more on preventing problems, rather than just insuring against them. Policies can even be written to meet short-term needs or events, such as a child driving off to college.
Technology has also changed how insurers operate. Many business decisions are being handled by computers, which can perform more complex yet routine tasks, including underwriting and claims processing. The process helps insurers optimize operations, reduce losses and manage risk. But trust in the algorithms becomes another concern. Periodic tests are necessary to review the framework and ethical ramifications that are embedded in the analytics.
Understanding the full impact of this digital upheaval will take time. What is clear, however, is that the industry needs to start rethinking how it manages trust. Here are some guidelines that companies should consider.
Build trust gradually. Customer confidence is earned in stages. Collecting new customer data over time can improve the likelihood that customers will provide accurate personal data.
Make transparency standard. Keep customers informed about how their data is being used. Develop a transparent and clearly worded data usage policy.
Share pricing structure. Customers want to know how their information is affecting their policy. Be open about pricing, underwriting and claims.
Tailor policy offerings. The line between a customer’s personal and commercial information is blurring. Make sure your products and services are evolving to address this change.
Update back-office technology. Application programming interfaces can improve your back-office operations. This can help strengthen ties to outside InsurTechs, ease integration of new technology and improve trust with customers.
Learn more about earning and managing trust in the age of data for insurers.
