Analyzing new sources of data can help insurers create direct link with customers: speaker

Insurers that collect and analyze new data sources – including from sensors – could create direct links with customers, without the need for intermediaries, and promote enhanced personalization, Steve LaValle, a principal at Ernst & Young (EY), suggested during an industry event in Toronto Thursday.

“In the past, we’ve been reliant upon brokers,” LaValle told attendees of Insurance Analytics Canada, being held May 12-13.

“With the sensor data that we have available, we have direct, unfettered streams of information. We’ll probably see disintermediation of brokers; we’re going to see new entrants come in, some of them that already know how to use this type of information, so we have to be ready for that,” he predicted.

“The good news is that, in the past, you might not have had that much engagement with your individual customers. Now you will have real, live links. You can know who your customers are, what they’re doing and how they’re changing over time, which will drive more individualized relationship management, more personalized product bundling,” he suggested.

LaValle was providing some highlights from EY’s recently released study, Sensor Data Survey: Disrupt or be disrupted, based on responses from about 1,800 organizations around the world, including 400 insurers.

The study – which considered the impact of new data from wearables, sensors on objects, location-based sensors and geographic information systems – explored the differences between so-called leaders and laggards.

“You cannot stay in the laggard space of not embracing, not creating the analytics and the personalization that you’re going to have here because everyone else is going to be personalizing that,” LaValle (pictured right) advised attendees.

By not getting on board, “you’ll be driving yourself into adverse selection and, ultimately, a going-out-of-business strategy,” he predicted.

But the insurance industry has plenty of catching up to do. LaValle said that technology and banking dominated the list of companies best at knowing who their customers are and what they do, “which really makes sense because they have access to unfiltered information flows coming in, which enable them develop models and such.” The top insurer was in the 41st spot.

Insurers were “first in being able to use the information that our customers and brokers and partners tell us,” he said. “However, we are last in gaining information, gaining value and monetizing the new sources of information,” he pointed out.

All these other firms “are very good at using this type of information to adjust their value props, and yet you see the insurers are so far down the list that we’re very concerned about the new entries and threats from that,” LaValle told attendees.

All types of data sources are valuable, he suggested, but the value “when you look on the sensor side is that it’s not subject to the manipulation that you get from self-reported.”

The study considered organizations with the highest growth rate in profitability and the greatest new product innovation rates. Leaders were in the top third for both categories, while laggards were in the bottom third, LaValle said.

“The leaders, those that were the most innovative and growing, were really focused on integrating the external data sources and adding regularity to the data they have today,” he reported. Conversely, for laggards, “integrating the data sources is the least important thing,” he added.

LaValle’s past work with organizations has shown “the number one reason analytics is not adopted is that the business people don’t know how to apply it” to be able to get to “an actionable level. When you are able to apply it at an actionable level, with these types of characteristics, it’s synergistic and you build and you engage.”

Heather Masterson (pictured left), chief operating officer of Travelers Canada, told attendees during an earlier presentation that, when it comes to analytics, her company is adopting a forward-looking and customer-centric approach. “We need actionable, visual reports that are dynamic, that are flexible, that provide us with real insights, real information and that allows us” to make decisions quickly.

The three components of data, technology and people are all needed to drive insights, Masterson suggested to conference attendees.

“If any of the three components is weakened,” she said, “then that diminishes our quest for increasing return on investment.” As such, it is necessary “to make sure that we can effectively mine and manage our data,” she added.

Looking at data as being structured and unstructured, as well as internal and external, “the p&c world really still is in that structured, internal environment. That’s where all our transactional data lives: our claims data, our underwriting data, our financial data and billing,” Masterson suggested. The goal, though, is the explore other types of data “to get closer to our customer and understand what our customer is doing, understand their needs.”

Internal and unstructured data, “in our mind, this is a gold mine. This holds the key to actions, interactions, behaviours and if we can track what someone is doing and understand why they are doing it,” she said. “Information is locked into unstructured data, so this is a real opportunity.”