Guest blog: What do you really know about your customers? The quick wins and game-changing possibilities of data

Paul Delbridge, Partner, Insurance Practice, PwC

Customers have become accustomed to the ease, speed and intuitive understanding of the multi-channel experience offered by the very best media, retail and technology companies. How can insurers compete when they have so much less information about their customers?

Much of what insurers do know about their customers is confined to the data captured as part of the underwriting process. The underlying analysis often relies on historical trends. But this is a marketplace being reshaped by new regulations, new legislation and changing customer expectations, and thus the past is a poor guide to the future. This is also a market in which customer-centricity now needs to go beyond treating customers fairly at the point of sale towards delivering the right outcomes during the lifetime of the policy. This demands a much closer look at what the customer needs and expects, and a forward-looking view of whether the product can meet these demands.

Once the policy is in-force, the subsequent interactions between insurer and customer tend to be equally sparse (e.g. renewals, claims or pension contribution changes). Insurers are unlikely to find out about key life events such as a new baby, for example, which would have a significant impact on the customer’s spending behaviours, savings and protection needs, and hence offer important openings for the insurer. Further problems stem from the inability to gain a single customer view from disparate systems that aren’t set up to speak to each other. As a result, many insurers don’t know enough about what their customers want or how they’re likely to behave.

Insurers don’t have to be in the dark. The data is out there. And a new generation of predictive and behavioural models can help them to glean valuable new insights. So how can insurers use these opportunities to sharpen their customer understanding and meet today’s fast changing demands?

We believe that the way forward is a twin track approach:

1. A fresh start in seeking to improve the integrity, timeliness and usability of the data that’s already within insurers’ systems. This would be supported by stronger governance over who owns the data and how to maintain proper quality and control.
2. Capturing new types of data and then supplementing this with appropriate partner and external data sources.

Applying this approach opens up both immediate gains and a longer term shift in customer insight.

Quick wins

1. The now widespread use of credit scores in personal lines rating shows how much of a difference externally-sourced data can make. Comparable possibilities include pushing for full postcode data for customers brought in through intermediaries, affinity groups and corporate partners, which would provide a valuable indicator of socio-economic group, demographic profile and financial means.
2. Partnering with banks, retailers or affinity groups to gain information on behaviour, interests and spending patterns, which would open the way to the development of tailored products and features.
3. Taking advantage of other available information sources such as the national census, marriage and birth registries and social media to improve understanding of customers and awareness of new life events.

Longer term opportunities

1. Greater use of social media monitoring and dialogue to glean real-time marketing insights and involve customers in product development and improvement.
2. Taking wearables to the next level by using them to enhance risk awareness and risk mitigation in areas such as providing health alerts. There are also opportunities to expand the use of tracking and monitoring data in areas ranging from equipment sensors to the GPS transponders on container ships to offer real-time risk monitoring, pricing and protection, stretching the application of telematics.
3. More and better data is just the start. Combining conjoint analysis techniques with the latest generation of analytical tools would enable insurers to go beyond likes and dislikes to develop a three-dimensional picture of customer preferences, trade-offs between different options and what they would be prepared to pay for particular features. Further developments include agent-based modelling, which allows insurers to use detailed customer information from simulated populations and apply behavioural economics to forecast future behaviours across whole portfolios.

Game-changing possibilities

A superior understanding of customers’ needs, motivations and likely responses is truly differentiating in any market or industry – the essence of true customer-centricity. But within insurance, the ability to make use of timely, precise and high quality internal and external data and apply the most powerful analytical and predictive tools and techniques could be transformational. It would enable insurers to engage with customers on a new level, deliver the right outcomes and develop the lifecycle management that has eluded the industry for so long.

Paul Delbridge is Partner, Insurance Practice, at PwC

PwC are Data and Digital partner at the ABI Data Conference- ‘The bigger the better? Insurance, ‘Big Data ‘, and the digital world on 9th September at the BFI Southbank.