It’s rumored that Facebook has approximately 52,000 data points for every user. That’s 52,000 different pieces of information that can be used to completely customize the user experience, from serving the right types of content to showing advertisements for products they’re most likely to buy. This data allows for a positive outcome for all stakeholders. The good news is, insurance companies don’t need nearly that many data points to benefit from the power of data.
The insurance industry is in the midst of a digital revolution. Words like "data" and "insurtech" seem to arise at every turn, but many of these solutions are complex and expensive to implement, leading to low adoption rates and huge missed opportunities for insurance companies. Unless you understand the benefits of data, these barriers don’t seem worth the battle to overcome.
While insurtech solutions can streamline insurance sales and claim management, they can also provide vast amounts of data that insurers can leverage in countless ways: to improve the customer experience, build brand loyalty and decrease loss adjustment expenses, to name a few.
Improving the customer experience
Imagine receiving a personalized message from your insurance company before an impending catastrophe advising you of the event, the best evacuation routes, where gasoline will be readily available and what the projected severity of damage to your property is? That would probably be something you’d tell your friends and neighbors about.
Policyholders want to feel like their insurance provider has their best interests in mind. While insurance refers to the contractual agreement of indemnification upon loss, the word "insurance" also refers to a means of guaranteeing protection and safety.
With insurtech becoming more advanced by the day, there are solutions that can predict where damage will occur and how severe it will be with great accuracy. Insurers can partner with these insurtech firms to provide their policyholders with peace of mind before the storm and ensure their claim is handled successfully afterward.
See also: Underwriting Enters a New Age of Data
Building brand loyalty
Gone are the days of a birthday postcard from your dentist; you most likely get a nice ‘happy birthday’ email now. But did you ever consider that your birthday is a data point being leveraged by companies to improve your customer experience, increase conversion rates and promote brand loyalty?
While it may seem trivial, those small efforts go a long way toward building brand loyalty in consumers, and considering that 65% of consumers have cut ties with a brand after one bad customer experience, brand loyalty is extremely important. (SOURCE: Digiday)
Decreasing loss adjustment expense
Verisk found that P&C insurers experienced a 10% increase in loss adjustment expense (LAE) in the first quarter of 2022 alone. There are a lot of moving parts and stakeholders involved in the servicing of an insurance claim, and insurers are always working to keep loss adjustment expenses down.
Unfortunately, that can be at a detriment to the policyholder at times. By collecting and leveraging the right data, insurers can reduce their LAE and increase their customer experience.
See also: Data-Driven Transformation
The future of insurance claims
Using geospatial technology and historical claim data, claim servicing firms can predict desk adjustments with high accuracy, reducing LAE and increasing speed to indemnification.
Some firms are benchmarking parametric insurance and looking to leverage data to instantly remit payments to policyholders who experience a loss and, depending on the surety of the data, before the loss even occurs under traditional insurance contract. By knowing where the catastrophe will occur and how severe the damage will be, insurance providers can help their customers start to rebuild faster than ever.
Not only do these technologies predict events, they can also learn from past storms and provide data that can be leveraged to provide accurate peril coverage to policyholders.
By looking at historical data, insurers can identify the location and frequency of perils such as tornado, hail and flood and review existing policies to ensure that their customers have the appropriate coverage before they experience a loss.
Data doesn’t have to be complex. Something as simple as the policyholder’s first name or birthday can be an extremely useful data point that insurers can leverage to increase conversions and build brand loyalty. In fact, personalization of the subject line in emails can yield an open rate of up to 50% (the average being less than 18%).
Qualitative data is often overlooked by both insurance and insurtech companies alike, as it is more difficult to measure and interpret. But it can be just as valuable as quantitative data and sometimes even more so. A customer satisfaction survey sent after a claim can help insurers identify opportunities for improvement, find weak spots in their claim workflow and even spotlight exceptional employee behavior. This can be a great starting point for insurers looking to start using the power of data.
