How UK insurers can use data to innovate new service models

As demand for traditional policy-based insurance continues to decline, forward-thinking insurers are innovating new models to meet customer needs.

The insurance industry will never be the same again. Traditional policy-based insurance is in decline, and the ubiquity of smart, connected digital technology has had an irreversible impact on customer expectations.

In response, forward-thinking insurers are shifting from products towards a more customer-centric service model. One which uses data in smart ways to deliver fast, context-aware experiences in the right place, at the right time.

In fact, 35% of insurers already generate over 30% of business from service-based offerings over product-based, and by 2022, this will hit 61%. But changing customer needs and expectations aren’t the only contributors to this shift.

New risks, new rewards

From the effects of extreme weather and the vulnerabilities of an ageing population, to the emergence of new cybersecurity risks – there’s no shortage of new risks for insurers to cover.

But to do so effectively, insurers must combine these new risks with the lifestyles and expectations of today’s digital customers to innovate new product and service models.

For example, by using emerging technologies like advanced data analytics, artificial intelligence (AI) and the Internet of Things (IoT), insurers can gain greater insight into their customer’s situation and respond within context to their needs.

By 2024, 33% of premium volume will come from brand new propositions (Deloitte)

What do these new models look like?

One way insurers can provide a smarter, more tailored experience is through proactive, preventative service. For example, by using data collected by IoT-connected sensors to track and respond to home security, or by using data from health trackers to anticipate problems and intervene before a threat to an individual’s health occurs.

Where the focus was once on products that reimbursed policyholders following damage or loss, insurers can now help prevent people from experiencing that loss in the first place.

But this is just one example of how insurers are already innovating service around both emerging threats and customer needs. Other examples include:

• Embedded models: This involves embedding insurance within the overall cost of using a product. For example, a rent-by-the-hour vehicle, saving the customer the hassle of taking a separate policy out before use.
• Personalised models: A personalised model uses data collected at the customer touchpoint to dynamically tweak an insurance product to reflect the customer’s situation and behaviour. For example, in-care telematics can help insurers dynamically price car vehicle insurance to the individual driver based on their driving style and history.
• Niche models: Niche models reflect a customer’s specific needs, or individual items. For example, when a customer needs a camera or even their nose insured, or a one-off event or scenario covered, such as a cancelled wedding or alien abduction.
• Parametric models: This model gives the customer peace of mind knowing that the triggering of a pre-defined event will cause an automatic pay-out. For example, by using third-party air traffic data, insurers can know if a customer’s flight has been delayed or cancelled, and automatically pay out without the need for a claim.

“Customers are increasingly looking for frictionless services across the board. Insurance is some way behind, but those that are investing more in technology and offering the market an easy and complete experience that offers clear solutions to customer problems are in a good position.” Olivier de Groote, Partner, Deloitte

The role of data in developing new models

To keep pace with the providers pioneering these new customer-centric models, insurers will need to make smarter use of their data.

Emerging insurance products and services rely on insurers being to ingest large volumes of data in real-time; combine it with customer data to generate instant or dynamic pricing; and analyse it to refine existing models, predict new trends, and suggest further innovations.

And technology is just one side of the coin when it comes to new data management and analytics technologies. Insurers will also need access to expert data developers and data scientists; skills that are hard to find and greatly in demand.

In our new white paper, Data: The Key to Transformation for UK Insurers, we dive deeper into how insurers can use data to modernise and innovate new products and services. You’ll also learn how Adatis can support you with the analytics and data science expertise you need to implement new, customer-centric operating models.

Get the white paper