Capitalizing on Analytics

2nd Annual Insurance Analytics Canada Summit 2016
Toronto

There was plenty on offer during Insurance Analytics Canada Summit 2016, held May 12 to 13 in Toronto. Attendees were provided a mix of facts, observations and commentary on an array of topics, ranging from integrating real-time data to adopting a customer-centric approach and addressing autonomous vehicles.

CREATING DIRECT LINKS TO CUSTOMERS

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 the recent analytics summit.

“In the past, we’ve been reliant upon brokers,” LaValle said at Insurance Analytics Canada Summit 2016. “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… so we have to be ready for that,” he advised.

“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.

“You cannot stay in the laggard space of not embracing, not creating the analytics and the personalization,” LaValle emphasized, citing findings from EY’s recently released survey of about 1,800 organizations around the world, including approximately 400 insurers.

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

But the insurance industry has plenty of catching up to do.

Survey results show insurers were “first in being able to use the information that our customers and brokers and partners tell us,” said LaValle. “However, we are last in gaining information, gaining value and monetizing the new sources of information.”

His 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” so that they are 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.”

REDUCED RATES MUST FOLLOW

The first benefits of vehicle automation will be reduced collision frequencies in vehicles equipped with automated driver assistance, but consumers are also expecting that the technology will result in lower insurance costs, Tim Bzowey, head of home and auto insurance at RBC Insurance, told summit attendees.

“Our historic approach has been to say that time will tell what the net effect really is of all of that technology,” Bzowey said at Insurance Analytics Canada Summit 2016. Because data exists and those vehicles are already on the road, it may be more accurate to now say that data will tell the tale, he pointed out.

“Consumers don’t seem prepared to wait for loss trends to emerge over time and those making the vehicles, maybe are even less patient,” Bzowey suggested.

“Data available for collection today from programs such as usage-based insurance can help us prepare for an automated future now,” he said, adding that regulators in most provinces “have an opportunity to expand and speed up the narrow and highly conditional scope of approvals today. Unmet needs can be served in a global economy in spite of local restrictions.”

Bzowey said “the people who have it (data) are out in front.” Emphasizing that opportunities are emerging, “connectivity of everything and the data available for collection could inform exciting new products and revenue streams, in addition to more frequent opportunities to communicate with our clients,” he told attendees.

For example, Bzowey said, the “fee-for-service model could expand our customer relationships to adjacencies like automated vehicle driver training certification, household management services, financial planning and personal coaching, among others.”

APPS CANNOT BE STATIC

It is important for customer adoption that mobile apps not be static, Sherif Gemayel, president of Sharp Insurance, suggested during a session at Insurance Analytics Canada Summit 2016.

Sharp Insurance’s mobile app, for example, contained things like how to contact the company and how to submit a claim when it was first created, Gemayel told attendees. But the app was static.

“We learned that really isn’t what the consumer is looking for. Nobody was really using it; we couldn’t get any kind of adoption on the technology,” he said.

“Over the years, we developed our mobile app and now we have a whole app that offers real-time data to our consumers,” Gemayel noted. In addition, consumers can also now get policy and payment information, and even liability cards on their phones, he reported.

To help understand their customers, he told seminar attendees that the company looked at mobile versus desktop users, the time of day consumers are accessing the site, the pages visited and the bounce rate.

Characterizing the results as sometimes surprising, he reported the biggest usage for the app was between 8 am and 5 pm, with about 65% of clients using the option during work hours.

“We were convinced people would use this technology more so during the evenings,” Gemayel said. “They wanted to do things on their own time was how they wanted to be serviced,” he noted.

Another finding related to claims submissions, Gemayel reported. As of this past April, there were no claims requests through the app from its about 6,000 users, he said.

“We went in thinking people are going to want to submit claims through a mobile app because it’s better and more accurate,” Gemayel told attendees.

Instead, most consumers were using

the app for liability cards or policy information and the usage was pretty consistent from Monday to Friday.

“Not understanding how your customers interact with you online is basically like driving at night without headlights on,” Gemayel cautioned. “You might see a little bit, but, ultimately, you’re not going to get very far,” he advised.

UBI PRESENTS WEALTH OF DATA

Usage-based insurance not only provides drivers an opportunity to reduce their insurance costs, it also offers insurers a wealth of new data on driver behaviour, Ontario’s finance minister Charles Sousa commented during his keynote address at Insurance Analytics Canada Summit 2016.

UBI “allows insurers to continually tailor coverage to meet the specific needs of their customers,” Sousa said.

“Data collection and analysis are producing efficiencies in the market that benefit both insurers and customers,” the minister noted. “Data analysis is also proving to be helpful in our ongoing fight against auto insurance fraud.”

The Ontario government is supportive of innovation in the province’s auto insurance market because it is “good for all of us,” Sousa suggested.

Citing Ontario’s auto accident benefits coverage, the minister said that it “is the most generous among provinces with comparable systems. Yet, we are always looking to improve. Data analysis remains part of our plan moving forward,” he added.

The minister cited the creation of CANATICS, a not-for-profit organization that pools and analyzes claims data to identify potential cases of auto fraud.

“Today, the use of this computer software allows for the inspection of large volumes of pooled data at a much faster rate than people ever could manually,” Sousa pointed out.

CONTINUING JOURNEY

Data analytics need to be seen as a continuous journey – not a destination – and those insurers that look forward to analytics in 10 years’ time will be the most likely to succeed, Ron Schwartz, president and chief executive officer of Adante Consulting Inc., said during Insurance Analytics Canada Summit 2016.

“The best firms, the most successful firms on this journey, will figure out how to make 2025 happen for them in 2018 or 2020. That’s the race,” Schwartz argued. “If you are moving out 10 years, the sooner you start getting into shape or getting fit for the race, the sooner you will be able to feel you are making progress down that road.”

The challenge, of course, is that the insurance industry is “really struggling to get a deep understanding of customers,” Schwartz said. “We are trying to understand where they are, what they cost us, what our opportunity is, what the best price is, how to improve the journey. They are all foundational starting points in the conversation about where we are headed with data analytics.”

However, Schwartz offered a caution to attendees. “Extrapolating from what we know today” could be dangerous and scary, he said, recommending that people avoid having extrapolation be their main method of forecasting.

His fairly confident prediction is that the things through which customers will buy in future “are absolutely not mainstream yet.”

Schwartz cited changes around everything from channels to consolidation, competition, emergence of managing general agents, marketing models, new entrants and client behaviour.

“What’s actually changing? In a word – everything,” he said plainly.

“We are really going to be using [analytics] as one of the most new and powerful tools to build ever better-informed, ever more nimble and agile and market-sensing organizations,” he predicted.

In 2015, Schwartz noted, companies got a competitive advantage by using “almost any analytics,” not necessarily even great analytics. But looking 10 years down the road, “what happens when analytics are well-understood and they are tablestakes in 2025 and any analytics is no longer a competitive advantage?”

Everyone, Schwartz suggested to attendees, actually needs to “think about that problem a little bit because that’s part of the journey.”

-Angela Stelmakowich, Editor; and Jason Contant, Online Editor