Insurers today have access to massive amounts of data, including past and real-time data, enabling them to make data-driven decisions. By deepening the analysis of this data, insurers get the information they need to adapt their products and services, improve processes, make quick and more strategic business choices, and better fight fraud. Here is a look at the main benefits of data for insurers.
The insurance industry is based on the identification, measurement, evaluation, anticipation, and prediction of risk. The objective? To control this risk. To accomplish these complex missions, insurance carriers have always used data. But through the digital transformation of this business sector, the volume of insurance data has exploded. For example, according to a study published in early 2022, it appears that nearly 80% of insurers now use predictive models and algorithms to identify fraud. That figure was as low as 56% in 2018! Another report, this time by Friss on insurance fraud, points out that when it comes to detecting fraud, 100% of insurers surveyed have mechanisms in place to identify potentially fraudulent claims.
From customer knowledge to the adaptation of insurance products, and the fight against fraud, the use of insurance data has many advantages.
Benefit #1: Better customer retention
The insurance industry is particularly competitive, as it is becoming easier and easier for customers to cancel their insurance contracts. Customers are therefore more volatile and require a much more ambitious customer retention strategy. With insurance data, insurance companies can better adapt their products & offering to the profile of the insured.
Benefit #2: More accurate risk assessment
To cope with the hyper-competition that now characterizes the insurance industry, one must be able to offer contracts and pricing packages that are calculated as accurately as possible. The massive use of data and algorithms allows insurers to assess risks more accurately in order to offer coverage that is personalized to the reality of policyholders’ risk exposure. As a result, pay-as-you-go and on-demand insurance programs are booming.
Benefit #3: Fraud reduction
The bane of an insurance carrier’s profitability is fraud. Not only do false claims represent a colossal loss of revenue for insurance companies, but they also burden internal processes, inducing the use of adjusters, investigators, and even particularly costly litigation procedures. By using the right data, in the right place, and in real-time, insurers can detect potential fraud as quickly as possible throughout the life cycle of the contract, from the signature to the claim management.
Benefit #4: More relevant product/service innovation
Understanding and anticipating policyholders’ needs in order to offer tailored policies is a major challenge for insurance companies. To do so, they rely essentially on how the claims are identified through data. Defining insurance products, estimating risk, and controlling costs are all essential lessons learned directly from insurance data.
Benefit #5: Process automation
One of the levers of competitiveness for insurance companies, and Insurtechs in particular, is process automation. From the underwriting of contracts to their day-to-day management, data makes it possible to automate a large number of operations. This automation helps reduce the time it takes to process customer requests (in order to maximize customer satisfaction), to control operational costs, to refocus teams on higher value-added tasks… The latter being essential to combat the difficulties of retaining talent in a tight job market.
Benefit #6: Personalized customer paths
No one ever solicits their insurance company for fun! Broken windshield, road accidents, water damage… Every interaction with an insurer is a moment of stress and worry for the consumer. With data, the insurer is able to support each of these interactions with a 100% personalized approach and to ensure an optimized follow-up of the claim.