Swiss Re : Data-driven insurance: ready for the next frontier?
Executive summary :
The rapid spread of internet-enabled devices and universal connectivity has changed consumer behaviours and expectations across all industries, particularly among the younger generations. The digital age has also brought an explosion of heterogeneous data from different sources and platforms, which providers of risk protection solutions can use to broaden the reach and boundaries of insurability. As their value chain becomes more digitally connected, insurers will be able to better understand customer segments and partners and adapt in near real-time.
Increased customer focus
In the short-term the digital insurance consumers will likely be young, educated and with higher levels of income. Over time, innovative digital cover options for all consumers will become increasingly available, making income and education less relevant factors in purchasing decisions. With advanced analytics capabilities, the insurer of the future will be very aware of customer needs and preferences, and provide personalised and real-time service, with flexible product offerings. Artificial intelligence (AI) will be used to interact and build understanding of the customer, and servicing will be through (personal) virtual assistance, 24/7.
Greater levels of engagement
Insurers will be able to move away from a product-focused sales approach to a one closely tied to the broader needs across the life time of a customer, with greater focus on the human experience. New generations of systems will deliver unprecedented levels of proximity and influence on customers, and insurers will go beyond mere channel management to optimising interaction across a diverse range of customer touchpoints. This will have implications for business models, how insurers interact with their customers, and the nature of the services they provide.
Over time, Big Data and sophisticated models will allow risk pricing at increasingly granular level. Emergence of new risks will create new underwriting and portfolio risk management techniques. Insurers will create early-warning systems to gather practical insights that prevent incidents to simplify and accelerate claims processing. Data-enabled processes will minimise friction and streamline the customer insurance journey, from request for coverage to claim. Digitalisation will thus help improve the customer experience and also the efficacy of back office processes.
Knowledge is power
Further, digitalisation will enable development of new data-driven business models impacting the entire insurance value chain. Access to data and the capability to model risks will be key. True leverage will come from utilising other assets, such as key data supplier partners, entry points to ecosystems, and the know how to generate customer insights. Insurers will need to decide whether to be suppliers of coverage, or to collaborate with and/or own new areas of business operation.
Technology could foster just ongoing incremental industry change by broadening the scope and affordability of insurance. Alternatively, potential for more radical transformation in the provision of risk protection services to households and businesses is up for grabs if some typical hurdles to innovation can be overcome.
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