What the Insurance Industry Needs in 2023 – Part 3

The pandemic introduced concerns, momentum and challenges that were greater than companies had previously dealt with. The ability to recognize where we are can no longer take months.

McKinsey reports that insurers using advanced data analytics can see their loss ratios improve from 3% to 5%, their business premiums increase by 10% to 15%, and customer retention in profitable segments jumps from 5% to 10%. (Photo: metamorworks/Adobe Stock)

Editor’s Note: Part 2 highlighted the importance of taking a broader view of the industry through the use of data analytics and the key to turnaround in today’s fast-paced post-pandemic insurance market. In Part 3, the final part of our series, we’ll connect the dots and lay out the best plan of action for future success and profitability in 2023 and beyond. The initial part of this series can be read here.

Data for good

Industry education has always been important and never more so than in today’s environment. The aim is to help insurers with knowledge of the consumer benefits of data from the point of marketing to the point of making a claim – what data is used and what data is not used in determining how much each of us pays.

More than 85% of US consumers get more competitive pricing thanks to the use of ancillary data. This is seen through previous claim and policy data, credit attributes, vehicle, driving behavior and public record data that feeds into insurers’ workflows – across auto, home, commercial and life insurance.

Why is more data important? We need to send messages to consumers that in pricing, the more variables used in calculating a consumer’s premium, the less likely a single variable will affect the insurance premium. For example, they should know that an unfortunate speeding ticket could increase a person’s premium dramatically if that were the only variable used in pricing.

Fortunately for consumers, there are many others that would offset the premium impact, and data is a key driver that helps make this happen. And when we add data — like connected cars and ADAS vehicle features — it can bring further opportunities for reduced risk, safer driving and safer cars.

Major life events such as a new baby in the family or buying a home change consumers’ insurance needs. By alerting insurers to these life events, we can help insurers support consumers to make sure they have the extra insurance protection they need.

About 92% of insurers use data pre-filling solutions to give consumers a faster and more accurate insurance quoting experience and reduce opportunities for fraud. In life insurance, we took a 45-60+ day process and streamlined it into minutes. Consumers need to know that at its core, it all comes down to data and innovation.

This new process was crucial during the pandemic, when insurers couldn’t send a nurse with needles. The pandemic, while challenging for all of us, has actually created opportunities for insurers to think differently and use data and analytics like never before. Thanks to data, life insurers can provide more policies to more consumers. Again, it all goes back to that broader view that we need in the insurance industry.

Connecting the dots

McKinsey reports that insurers using advanced data analytics can see their loss ratios improve from 3% to 5%, their business premiums increase by 10% to 15%, and customer retention in profitable segments jumps from 5% to 10%.

With the proliferation of so much data now at their fingertips, insurers have a great opportunity to create an insurance value chain that provides consumers with more personalized products, helping to not only attract new customers but also retain existing ones. they may have evolving needs. With data-driven analytics, insurers can use predictive analytics to help predict events and gain actionable insights designed to engage customers at the right time and through the right channel.

Predictive analytics also play a big role in helping insurers identify various instances of fraud before they happen, or even take retrospective action to take corrective action. The Coalition Against Insurance Fraud estimates that insurance fraud steals at least $308.6 billion each year from American consumers!

Finally, with the ever-increasing digitization of our world, insurers must continue to accelerate their internal processes or workflows to ensure customer satisfaction. Access to real-time data that is seamlessly integrated into insurer workflows simplifies and speeds up the underwriting and claims processes, and consumers are more willing than ever to share their data in exchange for lower premiums.

So, with so many changes and opportunities right before our eyes, insurers have important decisions to make. In our conversations with them about how best to use data across the insurance workflow and customer continuum—from point to point of claim—many ask the same question: What is your recommendation for how to implement these new solutions? Do I use what I already have and continue to incorporate new data into my current workflows? Start completely from scratch? How will artificial intelligence change the game? Finally, how do I articulate a continuous loop of knowledge from the beginning of the customer relationship all the way through the claims event to better understand my customer’s needs?

Because one thing is certain. We now live in a self-service world and consumers expect highly personalized and efficient engagements with insurers. Many insurers often fail to realize that their own onboarding processes will always be benchmarked against the best user experience. Unfortunately, this shift in thinking isn’t always a simple paradigm shift for insurers who have been doing things the same way for decades, and those who don’t use data properly and adapt to our “new normal” will almost certainly out of competition.

There is no turning back

All of us in the insurance industry stepped into the bigger picture at a time when the industry needed it most, and learned that there is no going back. Taking a broader view of the market is integral to truly understanding the health of insurers’ businesses and what their customers need most… and seeing the bigger questions that surround it.

Bill Madison is CEO of LexisNexis Risk Solutions’ insurance segment. He is responsible for all auto, home, life and commercial insurance businesses, including underwriting solutions, claims and analytics, for the US and international markets. Contact him at [email protected].


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