Insurers do not lack
customer data, they have computer systems overflowing with it. But
what many do lack are methods of exploiting the data to the full.
Charles Davis explores strategies which research firm Strategy
Meets Action highlights in a new study aimed at spurring insurers
into data-mining action.

 

For insurers, an informed
understanding of customers and risks means success. Growth and
profitability are highly dependent on the right products and
services being delivered at the right time and at the right
price.

A new US study by research
firm Strategy Meets Action (SMA), Changing the Game: Customer
Analytics In Insurance
, highlights the power embedded in
analytics for insurers and underscores the
opportunities.

SMA’s report finds that, as
computing technologies evolved over the past several decades,
insurers have experimented with and deployed a number of different
avenues to maximise the value of information. These approaches,
systems, and technologies include decision support systems;
knowledge-based systems; online analytical processing; expert
systems; executive information systems; business performance
management; data mining; business intelligence; and predictive
analytics.

Although some early efforts
did not live up to high expectations, systems for intelligence and
analytics have increasingly become important components of
insurance company business management and operations, and for
leading insurers, they are rapidly changing the competitive levers
for the insurance industry.

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Using a sporting analogy, SMA
finds “keeping track of the score is still important, but paying
attention to the plays being made and the creation of new plays is
equally, if not more, important”.

 

New areas of
differentiation

While the industry does not
lack for data, many insurers lack a state-of-the-art ability to
analyse that data, identify novel insights, and use that insight to
drive strategy.

SMA stresses that insurers
must aggressively build on existing competitive advantages and seek
new areas of differentiation. SMA believes the key to enhancing
market position lies in customer information – specifically the
ability to analyse this information along many dimensions for new
insights.

“In short, customer analytics
is the game changer,” SMA emphasises. “It opens the door for
identifying new market opportunities, creating new and enhanced
products, applying insights to business decisions, and bringing
more value to the customer relationship.”

SMA identified three stages
of consumer analytics adoption, and urged insurers to move from one
to another as quickly as possible. At a base level capability, a
single view of the customer is required to ensure that all
decisions, actions, and communications with customers are based on
an accurate and complete view of the relationship between the
customer and the insurer.

SMA noted that, according to
a recent study, 65% of insurers are using technology to integrate
customer data across different functional areas. Another 23% plan
to implement this capability over the next three years.

The next level of capability,
advised SMA, holistic customer communications, should be built upon
the foundation of a single customer view, enabling consistency and
high quality customer care in every interaction.

An enterprise-wide strategy
for customer communications management, stressed SMA, ensures that
information from customer interactions is captured, cleansed,
organised, routed and made available in a timely manner.

The goal – robust customer
analytics capability – raises the bar in customer insight and has
the potential to be a true game changer for insurers, believes
SMA.

By enriching information and
leveraging tools like business intelligence and advanced analytics,
SMA said insurers can gain new insights that transform their
customer interactions from merely efficient to informed
conversations – the kind of conversations that result in
cross-selling and up-selling and increasingly high customer
lifetime value.

SMA’s report also found that
many insurers still take an “inside-out approach” to the market,
starting first with a business unit view and extending out to the
market. However, SMA believes insurers that are highly successful
in the new playing field will use intelligence and analytics to
take an outside-in, customer-centric view of the world, beginning
with a thorough understanding of customers and implications for
every aspect of the business.

SMA found two questions can
be addressed by applying analytics to customer data: questions
related to understanding and improving the existing customer
relationship and profile and questions about new acquisition,
retention, or cross/up-sell opportunities to expand the
business.

While core transactional data
provides the baseline for analysis across the spectrum, and more
sophisticated analyses add supplemental data from both external and
internal sources, it is the unstructured data from call centre
transcripts, e-mails, claims, geographical or weather, and a
variety of other sources that help provide unique insights and
segmentation strategies for competitive advantage.

 

Systematic
efforts

To capitalise on the
analytics technologies available to them, SMA recommends insurers
do a much better, more systematic effort at acquiring, analysing,
and acting on data and put systems and procedures in place to
ensure that data is accurate, complete, consistent, timely, and
relevant.

The focus should be on
business performance management: flexible, ad hoc, timely reporting
of key performance indicators and business results now is a
mandatory capability across products, channels, geographies, and
market segments.

The end goal is gaining new
insights on customers. Data analytics allows insurers to combine
proprietary data with supplemental data and unleash tools to
understand customer needs, behaviours, and affinities. Data, in its
best, most analytical form, allows insurers to use advanced
analytic tools to discover triggers, patterns, and predictors of
customer activity.

“Insurers do not lack for
information – there is an abundance of information available from
both internal and external sources,” SMA stressed.

The research firm concluded: “What is lacking is the
ability to put the information to work – to drive great insights.
Insurers must have enterprise capabilities to cleanse and enhance
data to provide robust input to analytic tools. Companies that
utilise customer analytics create informed interactions resulting
in increased retention, wallet share and high customer lifetime
value.”