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December 7, 2010updated 13 Apr 2017 8:51am

Data gold mine awaits exploitation

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.

By LII editorial

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.

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.”

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