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Impact of Digital Technologies Are Enabling Insurers To Make their ‘Personalization’ Dream a Reality

Digital transformation in Insurance

The impact of digital technologies has percolated through to the most traditional sectors and insurance is most definitely one of those. Traditionally held back by slow-paced technology improvements and few intelligent customer touchpoints, the insurance industry is in the midst of a major technology transformation that is changing every aspect of the insurance model: from the way products are designed and delivered, to how customer interactions are managed, and now radical changes in the insurance business model itself.

The emergence and apparent convergence of new and evolving digital technologies (like sensors and monitoring systems, telematics, wearables and AI) are enabling insurers to provide high-touch, on-demand personalized experiences to a new generation of insurance customers. This is because they now have new and more effective ways to measure, control and price risk more effectively, so they can build innovative and targeted offerings and form seamless and deeper customer interactions.

For a while now, auto-insurers  have been sponsoring the retrofit of cars with data-capturing devices and are even partnering with original equipment manufacturers to gain greater intelligence on driving behavior to offer highly personalized premiums. With access to this data, insurers now have greater monetization opportunities as they can offer value-added services ranging from personalized driving recommendations, to helping track stolen vehicles or alerting users ahead of potential break-downs.

In this blog, we look at how digital changes are impacting different aspects of the insurance industry to benefit both insurers and their customers.

High-Touch Customer Experience

Digital technologies and data analytics are helping insurers know their customers better. Products can be priced more effectively, and fraudulent claims can be identified with greater accuracy. Data gives insurers opportunities to think of long-term growth armed with insights into their customer behavior – they can offer tailored products – and can offer personalized offerings. For example, data on a customer who has put his house up for sale can enable the insurer to proactively suggest new home coverage options. With valuable customer data from connected devices, digital records and social media, insurance companies can offer their customers real-time, on-demand services. Health Insurers like AXA are now utilizing data from wearables/fitness apps to proactively track customers, and help manage their health conditions and insurance profile. Insurers can leverage insights from omni-channel user behavior to offer products and services personalized to the customer’s needs. Data analysis now provides a 360 degree view of the customer’s preferences and risk levels, which is an opportunity to cross sell services to customers who have policies with different divisions of the same company. That can be achieved with a personalized user experience (landing pages, priority of search results) based on the insights they have from data on that customer. These capabilities require digital excellence and a consistent experience across multiple channels and intelligent platforms. The opportunity to differentiate with great customer experience is huge because consumers are attracted to offerings they find more in tune with their unique situation.

Product Development – Usage-Based Insurance (UBI)

Automobile insurance premiums have traditionally been driven by parameters that segment customers into groups – based on age, education levels, past accident history etc. However digital technologies are enabling customization of premiums based on much more current factors like driving behavior. The diagram below explains how UBI works.


Image source: https://www.confused.com/car-insurance/black-box

This helps the insurance company to incentivize safe driving by providing inputs to the customers on their driving skills and areas of improvement and should ultimately reduce the number of accidents and payouts.

Large Property & Casualty insurance carriers such as State Farm, Liberty Mutual, Allstate and Progressive have all now launched UBI products.

Process Transformation

Fraud is one of the major challenges faced by insurance providers.

Insurance companies in the United States suffer estimated losses of 80 billion USD yearly. Fraud comprises about 10 percent of property-casualty insurance losses and loss adjustment expenses each year, amounting to 34 billion USD (source: http://www.insurancefraud.org/statistics.htm#1). Using data and insights from diverse data sources such as past claim history, social media feeds and using big data analytics techniques, insurance companies are now better poised to identify fraudulent patterns, behavior and claims.

Let’s consider a simple example: There is a claim for the loss of a property and contents because of fire. Assessment photographs from CCTV help claim investigators confirm that there weren’t any of the valuables (like the ten brand new 27 inch iMacs the claimant suggests) inside the office. Additionally, it is noticed that the claimant had made two automobile claims in the recent past, and a social media post (made after the claim for loss of property) shows him gifting valuables to a relative. The aggregation of this data points towards a high probability of a fraudulent claim – or at least one worth investigating further.

This kind of analysis would likely have been missed by a fraud investigator following a manual process, but it can be efficiently done using a big data system. The use of artificial intelligence in fraud analytics is another exciting development that has the potential for higher levels of fraud detection. Blockchain technology promises speed, efficiency and transparency benefits when searching for  fraudulent activity by independently verifying the authenticity of customers, policies and claims using the decentralized digital repository.

Transformation of Business Model: Peer to Peer Insurance

“We work with a hypothesis and test-driven approach to make sure we are meeting our customers’ needs with our product.” These are the words of a CEO of a company called Friendsurance that is known to have pioneered the peer-to-peer insurance model, bringing the two different worlds of “insurance” and “social media” together to improve the efficiency and experience of both the consumer and the insurer.

Peer to Peer Insurance

Source: http://www.ironpointinsurance.com/lemonade-going-uber-insurance-market/

Companies like Friendsurance, Lemonade, Jointly and Guevara are disrupting the business model of the insurance industry. In Friendsurance’s model, a group of customers with the same type of insurance connect with each other. If no claims are made by the customers in the group, they receive a pre-agreed maximum payback. In case of any claims, the payback is reduced accordingly. The benefit is that group performance incentivizes customers to avoid unnecessary claims and they are able to secure a discount for the insurance premium based on their collective volume buying power.

The above scenarios are examples of a new direction for insurers. As newer technologies emerge the possibilities of digital disruption, efficiencies and new products are truly endless. Insurance companies that aspire to be ahead of their game should be investing in beefing up their digital prowess by building the right platforms and solutions that will enable them to interact with their customers seamlessly across channels, deliver personalized products on-demand, and add new revenue streams by being better positioned to capitalize on emerging business opportunities.

Ness works with leading organizations in the insurance sector to help them build innovative platforms and solutions to leverage the expanding opportunities in the fast- evolving digital insurance landscape.

To learn more about how we can help transform your business, contact us.