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Spotlight: Data transformation - What gets measured, gets improved when it comes to customer experience

Digital scales
scott field
Scott Field

Digital transformation has become the pervasive force progressing the modern insurance market. While technology comes with a myriad of flavours and facets, one truth is increasingly self-evident – that the quality of data used by an insurer is closely correlated with its ability to make the most out of market opportunities. Nowhere is this truer than in understanding customer sentiments, and consequently in improving customer experience.

Insurers are acquiring ever greater volumes of data for analysis, from a growing range of different sources. Many of these sources can be broadly described as telematics and the Internet of Things, as the software within everyday office or household devices becomes connected in order to feed data about their usage, and informs insurance policies and claims.

How to connect data with an improved customer journey will be crucial to getting the most out of much of the insurtech innovation that is currently sweeping through the personal lines, property, and casualty insurance sectors, directly focusing on improving customer journeys.

With this in mind there is a straight line that can be drawn between the quality of data that insurers harness and the quality of its customers’ experiences. Rather than organisations trying to do everything themselves, it’s also more important to build a partner ecosystem that performs the horizon scanning function for insurers and picks the best of the insurtechs solving their most pervasive challenges, to help them better harness their data and gain market-leading insights. This, in turn, allows insurers to focus on what they do best.

Telematics for the people

Telematics has been a game-changer in driving improved customer experience. Motor insurance has been the test vehicle for telematics, whether using dashboard black boxes, smartphone apps, or systems built into the vehicles. Because telematics data paint a complete picture of driver behaviour, insurers can more accurately price their risk. In turn, insurers get substantial profitability benefits because they are better able to properly match rate to risk.

The increased popularity during the pandemic era of usage-based insurance, such as “pay per mile” in motor insurance, will only accelerate this trend. Autonomous vehicles – and road systems increasingly linked with them – mean a far more connected future for car insurance in particular. Such trends of automation and IoT go far beyond just vehicles, so the potential for insurers for superior data capture is increasing exponentially.

Property telematics are the next frontier of telematics in the insurance industry. While programmes are still in their infancy, they promise to help spur the growth of telematics programmes and create new opportunities for carriers to deliver optimal experiences to their customers. Telematics connections are expected to boom in the coming years: industry experts forecast that the use of telematics may grow to 20% within the next five years.

The beauty of motor telematic programmes is they have created a transparent feedback loop to demonstrate how risk influences price. This provides insurers with the opportunity to improve their customer relationships, as pricing becomes more transparent and understandable. By having an open line of communication, the data-on-hand used to explain to customers which risks are influencing their price, brings opportunity for more clarity around pricing.

As safer driving and cheaper prices become increasingly closely aligned, pre-emptive risk reduction benefits will ensue as drivers reduce their risky behaviours, get coached on their behaviour, and even find out about repairs or other issues before they occur. From the perspective of an insurance company, this would be an ideal level of customer engagement.

Property telematics insurance programmes will require people to voluntarily put sensors in the home, a unique concept for many insurers. Typically, insurers don’t go into a customer’s home; property telematics programmes change the dynamic between the insurer and the policyholder and create a much more personal and open relationship.

Conducting an orchestra

Insurers need a capable policy administration system to orchestrate telematics and by extension for any IoT-based programme. This PAS must play the part of conductor for an orchestra, made up of many musicians playing a range of instruments from different families. It will need to integrate telematics data, as well as additional third-party data and services, configuring, coordinating and directing the appropriate workflows across multiple and potentially disparate systems.

A simple and seamless system for delivering quotes is probably the first pass or fail test for any insurer, with motor businesses again providing an appropriate example. While organisations will vary their approaches, a PAS will benefit from a full “single point of change”, which means that any change to the PAS, such as a changed limit or deductible, gets propagated over to the front-end app or website, using the ubiquitous APIs.

Building ecosystems

The next most important element is probably having the right artificial intelligence or machine learning in place so that in “the race to zero” as few questions are asked as necessary – typically four or fewer – to the customer. Beyond those few questions, any other answers needed can be pre-filled by the AI running its own searches, filters, estimates and background checks. This invariably means using several outside vendors within a partner ecosystem, such as anti-fraud specialists.

By integrating an effective PAS, some smart AI, and a broader ecosystem of partners, a quote can reach the consumer in a matter of seconds – providing a smooth start to customer experience. Insurers may prefer to use only their own in-house historical data, or their own data, sourced through telematics, but our argument would be that the partner ecosystem provides value access to a greater variety of sources.

Either way, the right architecture is essential. A flexible PAS, linking the front-end with telematics and other data sources, and AI under the bonnet to provide smart analytics and automation, will collectively provide the best solution.

Digital brings us closer

Some in the market claim that digital transformation is creating a distance between customers and insurers due to automation and online interactions, as opposed to face to face conversations. We feel this is about as far from the truth as you can get.

In fact, digital transformation and in particular the use of telematics give insurers a far stronger sense of each customer within their individual context, and offer the possibility of much more effectively managing the customer journey so that resources are directed where they are needed most.

It’s all there already in the data - the challenge is to collect, connect and harness this data in a way that creates a user experience that exceeds customer expectations. 

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