As the fintech movement takes a bigger hold on the insurance industry, new entrants are nudging out established players with top-notch digital advancements. In our four-part series on the march of insurance tech (insuretech) new market entrants, we’ve discussed how up-and-comers are staking out wallet share of incumbent players and how new technologies are leading the way for venture-backed companies to shake up areas related to new customer acquisition. This week, we’ll look at data and analytics and how new entrants are seizing on insights to create a new insurance experience.
During the 17th century dawn of insurance, risk was assessed on an individual basis, depending on what was to be insured and the environmental conditions surrounding it. Over time, the concept of insurance grew and was adopted by the general populace. With greater numbers of individuals assuming the same type of coverage, it became possible to pool risk, reducing premium costs and establishing the basic approach most insurance companies use today. Now, as the customer revolution spins its wheels, insurers are under increasing pressure to move beyond demographics-based (age, gender, location) insurance back toward custom-tailored risk assessment and pricing, founded on personal usage and statistics.
Pricing has always been a sticky area for carriers and their customers and some new entrants are employing analytics to collect and analyze usage data, such as drive distances, to more accurately establish costs based on the driver’s habits instead of an established demographic pool. Inspired by the increasing adoption of smart phones, one startup is pushing new limits by powering up customers’ handheld devices to collect drive data that is used to personalize coverage. Others have stepped up the customer-centered experience, tapping into the smart phone’s power to gather data from the car itself, enhancing customer relationships by also offering to improve the health of their automobile or better navigate their daily commute.
In the property space, similar technology gathers data related to home systems and alerts the homeowner to possible threats, such as a gas leak or fire, reducing losses and safeguarding one of consumers’ largest assets as well as personal life. This type of customer-first approach puts new entrants at the forefront of the industry as they exploit inherent digital savvy to make better use of data and analytics to personalize the insurance experience.
Redefining a Customer-pleasing Experience
Inspired by customer-focused advancements in other industries where multi-channel engagement is the norm, consumers now select their insurer in part based on the carrier’s ability to deliver high levels of service and omni-channel interactions. This puts digital distribution at the top of every insurer’s must-have list, but with only 50% of carriers actually certain about their digital distribution strategy,[i] and recent consumer reports indicating declining customer satisfaction levels,[ii] it’s becoming clear that incumbent insurers aren’t delivering the experience that customers’ desire. Although the more technology-centered base of most new entrants gives them a leg up on establishing digital offerings, many new entrants are utilizing analytics to ensure optimum customer interactions.
For instance, imagine that a customer searching for coverage lands at a carrier’s site only to find that they are unsure how to complete the product application. At this point, they either spend an inordinate amount of time trying to respond to application prompts, which drastically lowers customer satisfaction, or they abandon the process completely. New entrants are employing analytics to analyze data on customer behavior, picking up on cues that indicate when a customer is in danger of being lost and responding in real-time to insights that offer guidance on how to best support the customer’s completion of the application.
Analytics also offer insights that aid in retention. Consider being able to send frequent communications to existing customers that strengthen relationships and promote loyalty. Nearly 57% of consumers say they want to hear from their carrier’s at least twice a year with information that is relevant and specific to them. New entrants are seizing on this and using analytics to gain peeks into customers that prompt conversations and engagement across the lifetime of the customer.
Better Insights for a More Profitable Tomorrow
There is one thing that new entrants understand well: customers want a new insurance experience. More digitally savvy and unhampered by the challenges that face existing insurers, they are leveraging digital means to collect high levels of data and analytics to sort through the vast scores of information to create products that more closely meet the needs and wants of today’s consumer.
As new entrants continue their movement into established insurer territory, analytics is only one of the ways they are meeting the demands for a rich new customer-centered experience. Next week, we’ll look at how insuretech new market entrants are delivering innovative products and meeting customer price points. Then, in August, we’ll wrap up with a thought leadership piece designed to guide established players in meeting the rising wave of new entrants.
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[i] Global Digital Insurance Benchmarking Report 2015. Bain and Company, 2015.
[ii] J.D. Power. Digital Are the Channels of Choice for Today’s Auto Insurance Shopper; Digital Leaders Setting the Pace for Premium Growth, Says J.D. Power Study. www.jdpower.com. J.D. Power, 29 Apr. 2016. Web.