Canadian Underwriter

Data Ready

May 23, 2014   by Terri Goveia

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When Michel Laurin describes his company’s latest auto insurance product, he focuses on what sets it apart from a traditional policy—using real-time data to track driver behaviour, and actually letting drivers know how their habits compare to others on the road.

But Laurin, president of Industrial Alliance Auto and Home Insurance Inc., wasn’t just outlining specs when he shared product details at the 12th Annual P&C Insurance Technology Conference. The things that distinguish Mobiliz—the insurer’s telematics-based offering—also provide a larger prescription for insurers to maximize customer data for better engagement. According to Laurin and other keynote speakers at the conference, the industry
already has the tools necessary to shape a dynamic, consumer-centric future. It just needs to put technology at the forefront of its efforts.

The Case Study: Mobiliz

Industrial Alliance’s experience with Mobiliz offers a case study in next-wave technology, and Laurin’s presentation, “Technology Enabling Transformation,” provided a reverse-engineered blueprint. Even before it chose a target market or
product idea, the company made a conscious decision to redefine its overall approach to insurance, he told those gathered at The Sheraton Centre in Toronto on March 18.

The company borrowed inspiration from two major brands—Toyota’s “lean” manufacturing strategy, and Apple’s innovation. Those principles then prompted two questions: “How can we put the customer at the centre of the [product]?” he said. And though his team was interested in telematics, they also wondered, “how can we use this technology differently?”

The answer was Mobiliz. The new product, which launched in April 2013, is aimed at younger drivers. Good driving is rewarded with discounts, and dangerous habits with surcharges. Although other companies in Canada and the U.S. have introduced telematics-based programs in recent years, Laurin’s team wanted to create a safe-driving program for drivers most likely to have accidents—those under 25 years old—that wasn’t “coercive.”

Laurin noted that certain product features— rates fluctuate from month to month based on driver habits, and drivers can cancel a policy without penalty—set new benchmarks for insurance products. And so does the product’s foundation. “Insurance has forever been [about] look[ing] at your past to predict your future,” he said, noting that the company’s message to Mobiliz drivers is that “your future will be different because we will make you aware of the behaviour that causes accidents.”

Analytics: “The Next Natural Resource”

Putting the customer first, as Laurin described, realigns the insurer-consumer relationship. But, to make that shift, insurers also must realign key internal functions—and their goals, according to Bob Humphreys, manager of demand programs at IBM Canada. His presentation, “The Future of Marketing in Insurance,” zeroed in on an essential internal collaboration: “To become more relevant, marketing needs to align with IT the way it does with the C-suite,” he said. “Technology is the number one external force affecting the enterprise.”

Aligning marketing with IT will allow insurers to maximize two key competencies— knowing the customer, and engaging with them. Doing so is essential to meeting the needs of the emerging digital consumer. Recent studies show that CEOs recognize the digital consumer’s importance, “but most won’t be able to keep up,” he warns.

Humphreys acknowledged that more people turning to social media for information, and shifting demographics (an older population combined with a growing number of new immigrants), have prompted new consumer behaviours—and marketing teams must now set new targets. “With all the data and devices, the mission of marketing [is to] shape behaviour rather than belief,” he said. His advice to insurers: “Don’t stop. Engage. Figure out how to use data to establish a deeper relationship with the consumer.” That might mean determining which policyholders want more handholding, who prefers to be left alone, or who just wants to chat. “Analytics will be the next natural resource,” he said.

Humphreys set three main objectives for IT and marketing departments: understand the customer as an individual; recognize what they want; and, finally, encourage the rest of the company to interact with the market. “Having the data tell a story is one thing, but getting the organization to act is another,” he said, noting that any action “has to span the enterprise.”

Moving forward, the IT-marketing partnership is crucial to those efforts, he stressed. “If it’s done well, what hits the market will have increased relevance.”

Bring in Brokers

The panel “Insurance Marketing 2014” included Humphreys, Laurin and James Chmiel, president of Erb and Erb Insurance Brokers Ltd. It was moderated by Debra Ambrose, Aviva Canada’s senior vice-president of national marketing and distribution. The panel underscored Humphreys’ message about shifting focus. Risk management and actuarial science have always been the underpinning of insurance, said Ambrose, “but if an organization is going to win, the role of marketing and IT will [have to] be more important.”

But if IT and marketing shape the consumer message, where is the place of the producer in this new dynamic? Chmiel pointed to his brokerage’s “digital storefront” as proof that brokers can still take ownership of consumer relationships and offerings. “The consumer has choice and it’s incumbent on me to step up and deliver on [their] demands,” he said. “Insurers should work with brokers so that we both cross the finish line at the end of the day.”

Although Chmiel worked closely with a marketing team to put together his brokerage’s digital efforts, making that collaboration work at the insurer and industry levels will require big strides, said Humphreys. He noted that early studies gauging the level of co-operation between chief information officers (CIOs) and chief marketing officers (CMOs) show that “we’re still at the early stages.” Though that partnership has emerged in some organizations, “for most, it remains the same,” he said.

For the industry to make the most of collaboration—and serve consumers best—members must adjust the conversation, noted Laurin. “You need to make sure that everyone around the table is willing to transform the business,” he said. A reliance on old models and old ways of thinking are added barriers. “Our industry is avoiding risk. [For example,] when a disaster hits, we reduce coverage. We avoid risk and we should be dealing with it.”

Insurance, 2023

Outside forces are already reshaping the industry, noted Catherine Kargas, vice-president at MARCON. During the final panel, “Insurance, Innovation and Transformation 2023,” she pointed out that trends in car and ride sharing will affect a huge segment of the industry’s clientele and car-sharing businesses are expected to increase six-fold by 2020. “We’re looking at fewer vehicles on the road,” she said. Fewer vehicles, but more fleets. “There will be an opportunity to provide insurance to those who don’t own a vehicle, but will be in a vehicle.”

The eventual shift to driverless vehicles will also upend existing industry models. “We’re looking at a whole new set of underwriting variables,” said Greg Purdy, managing partner at Pathway Partners Ltd. “It will change everything that we do moving forward.”

Among the biggest changes will be how insurers measure risk and and define groups. Adapting to the new environment means “searching for the customer,” according to George Cooke, president of Martello Associates Consulting. “Someone is [still] going to manufacture, buy and sell cars,” he said. “There will be collisions and someone will provide insurance.”

The product will change, and so will the buyers and distribution methods, he predicted. But Cooke also offered clear advice on how insurers can keep up: “The winner has figured out who the customer is and can take ownership.”

Copyright 2014 Rogers Publishing Ltd. This article first appeared in the April 2014 edition of Canadian Insurance Top Broker magazine

This story was originally published by Canadian Insurance Top Broker.