Traditional insurance providers should not overlook how data analytics can be used to transform customer satisfaction, but are not fully leveraging the data they already have, suggests a new report from Capgemini Consulting.
Released Tuesday, Fixing the Insurance Industry: How Big Data Can Transform Customer Satisfaction notes that 46% of surveyed insurance companies believe not enough is being done to leverage their data.
Breaking down that 46%, 73% of respondents agree the overall amount of inbound data has increased in the last 24 months, 68% agree the variety of inbound data has increased over that timeframe, and 52% agree the speed at which useful inbound data is generated has increased in the last two years.
Despite the significant growth in both the volume and variety of data to which insurers have access, almost half of insurers are not leveraging what they have.
Add to that that using big data to improve customer experience is frequently overlooked. “While 33% of insurers in a survey cited improving underwriting profitability as a top priority, only 12% did so for the enhancement of customer experience. This is startling given the poor levels of customer satisfaction in the insurance industry,” states the report.
“Customer satisfaction levels have hit worryingly low levels,” Capgemini suggests. Citing results of a company survey in 2014, the report notes that just 29% of surveyed customers globally are satisfied with the services of their insurance providers.
Of the non-life respondents, 44.6% were satisfied with quote gathering in 2014, down from 48.2% in 2013; 44.3% were satisfied with policy acquisition, down from 49.5%; 42.8% were satisfied with policy servicing, down from 47.8%; and 40.7% were satisfied with claims servicing, down from 43.0%.
And the situation was worse among Millennial consumers. “In North America, for instance, the drop in positive customer experience levels was 10% more pronounced for Millennials compared to other age segments,” the report states.
“In overlooking the impact of big data on improving customer experience, insurers are losing out on a variety of opportunities to build stronger customer relationships and drive competitive advantage,” Capgemini contends.
Customer satisfaction becomes all the more important in light of greater competition, which traditional insurers are facing from “new entrants determined to meet customer expectations,” the report notes. “Non-traditional competitors, such as ecommerce majors and technology start-ups, are leveraging their data-rich customer interactions to create and sell insurance products.”
In all, 66% of respondents agree that big data is enabling non-traditional providers to move into the industry, and 48% agree the industry is facing increased competition from data-enabled start-ups.
Insurers should look more closely at customer analytics for a number of reasons, the report recommends.
• Customer analytics allows insurers to personalize pricing and reward customers for positive behaviours – The use of customer analytics allows insurers to assess risk factors and price premiums more accurately. The application of advanced analytics techniques also allows insurers to uncover links between disparate sources of customer data, which can be used to personalize premiums.
• Customer analytics boost customer service by increasing agent effectiveness – To retrieve customer information, customer service agents currently often have to navigate disparate sources of customer data, potentially antagonizing customers with delayed responses or with incomplete and outdated information.
• Analytics-driven insights enhance customers’ online experience – In order to meet customer expectations effectively, insurers will need to boost the experience that they deliver through their online channels. Research indicates that less than 30% of insurance customers report positive experiences with digital channels.
• Effective use of customer analytics allows insurers to offer value-added services – Effective use of customer analytics allows insurers to go beyond their traditional roles and deliver new services to customers.
• Customer analytics helps insurers identify new customer segments – Advanced analytics tools allows insurer to find and service customers with special insurance needs who often have difficulty finding the right policy or attractive rates. [click image below to enlarge]
That said, the report points out that there are still some continuing challenges to using customer analytics effectively. These include the following:
• A product-centric view prevents insurers form gaining a deeper understanding of customer needs and behaviour – A product-centric view blinds insurers to customer needs and customer lifetime value.
• Lack of adequate data infrastructure inhibits effective use of customer data – Capgemini research reveals that only 14% of insurers have introduced data management systems to predict future patterns in customer behaviour.
• Insurers only use a limited set of data sources to understand customer behaviour – Insurers make very limited use of unstructured data sources, such as social media and sensor data. Research shows that only 20% of insurers use social media interaction data and only 10% use sensor data.
• A lack of IT agility impedes insurers’ ability to develop insights from analytics initiatives – Capgemini research shows 51% of insurance executives believe that the IT development process at their organization is a constraint to develop insights more quickly, while 41% of insurers assert that the current development cycle for analytics insights is too long and does not match their business requirements.
• Lack of mechanisms to management data security and privacy – To put customer data to use, insurers need to set up systems and processes to manage privacy concerns. But Capgemini research indicates only 23% of insurers have put in place additional data security to protect customer data, and only 20% have established additional measures related to data privacy. [click image below to enlarge]
In light of these hurdles, the report recommends that insurers establish a data leader to take charge of the organization’s overall data strategy; augment data leadership with governance and KPIs (key performance indicators) to support a customer-centric operating model; invest in building data management infrastructure that enables a single view of the customer; adopt an agile test-and-learn approach to rapidly test and roll out new initiatives based on customer analytics; adopt non-traditional approaches to acquire big data and analytics skill sets; and develop transparent data privacy policies to address customer concerns around the use of personal data.
“The bar for customer service is being continually raised, which is an extremely worrying development if your customer satisfaction levels are heading in precisely the opposite direction, as they are in the insurance industry,” Capgemini notes in the report. “Insurers cannot ignore the opportunity that data offers to reverse this situation and put themselves back on the path to improved customer satisfaction.”