The New Age of Personalised, Data-Driven Product .../media/images/members centre/white...The New Age of Personalised, Data-Driven Product Development in Insurance 4 3rd Annual Insurance

The New Age of Personalised, Data-Driven Product Development in Insurance

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AuthorMorag Cuddeford Jones

EditorEmma Sheard Head of Strategy, Insurance [email protected]

Contributors:

Gabrielle Hase, Chief Executive Officer, CatDogFish

Sabine VanderLinden, Managing Director, Startupbootcamp InsurTech

Paolo Cuomo, Chief Operating Officer, Charles Taylor Managing Agency


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3rd Annual Insurance Analytics Europe SummitConference and Networking Event5th & 6th October 2016, LondonInnovative, Data Driven, Customer Centric: The Future Insurance Companyhttp://events.insurancenexus.com/insuranceanalyticseu

Insurers are no strangers to data but it’s the new data streams that can shed light on changing consumer behaviour - or indeed how insurers can change customer behaviour - that are proving revelatory.

Recently, there has been a real movement towards customer-centricity in the insur-ance sector, with executives working hard to find a way of engaging more deeply with customers. They’re keen to move beyond the sector’s two moments of truth (or pain, for customers more often than not) of renewal and claim into an ongoing, trust-based service proposition.

Partly driven by price competition and comparison sites, partly by the changing risk landscape, new technologies are providing opportunities for insurers to differ-entiate and expand product portfolios. But it’s not the hardware that’s important, it’s the data it generates and the resulting insights that are going to drive products that perform for insurers.

In September 2015, Ad Age reported1 on just one of the many internet of things (IoT) innovations that was beginning to impact customer behaviour. Philips’ dental-care brand, Sonicare, had released an app that turned children’s toothbrushing into a game.

By exchanging data between the app and the electric brush itself, the game could tell if the child had adequately brushed all four quadrants of their mouth in the standard two minute brushing period.

Initially, the children loved the game so much that they didn’t stop playing it after the toothbrushing was satisfactorily completed, so Philips had to adapt the app to make sure that the game character had had enough once the two minutes were up.

This simple app encapsulates a number of key learnings about data, consumers and how to capitalise on the insights.

First of all, using a ‘smart toothbrush’ is a seamless way of getting reliable dental-care data from a customer. Secondly, the app gave value in exchange for that data. Children were engaged, certainly, but it was really the parents (with the purchasing power) that were the target. For them, the benefit was no more bedtime fights over toothbrushing as well as peace of mind regarding dental health – ultimately, one would hope, resulting in lower dental bills.

Equally, the company recognised that the app had a specific function and its origi-nal iteration had unintended consequences. The game aspect was taking over from the primary aim which was to ensure a solid two minute brushing habit. It’s second iteration was designed to make sure the desired customer behaviour was achieved - the game actively stopped children brushing or playing for too long.

Finally, the data that the brush and app gathers can be fed back into the company. The Ad Age article originally suggested that Philips might be looking to make a direct tie up with insurers, however the publication was subsequently amended to state that the company’s VP of marketing was only including insurance in ‘general trends’ and that they had no intention of developing insurance-related products.

1 http://adage.com/article/datadriven-marketing/philips-connects-sonicare-kids-game-data-insights/300316/


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The same article however also reported on start-up Beam technologies, which is also developing app-related dental care and wholeheartedly admits that it is “not interested in toothbrushes at all. We’re interested in health data.”

Start-ups are certainly on the front foot when it comes to engaging with new technologies and sources of data. Techcrunch recently reported2 on Clover Health, a startup in the healthcare space that was using a combination of medical record information from claims to build an individual risk picture for each customer - not to create punitive premiums, but to develop services that would help customers manage their health better.

The ultimate aim is to reduce that patient’s reliance on the healthcare system (and insurance payouts) by preventing health issues before they arose. The venture capital community certainly sees the value in Clover’s proposition as the TechCrunch feature revealed the insurance startup had secured $100m funding.

Of course, it could be argued that data-driven health products are just the natural extension of the automotive telematics universe. The idea that sensors fitted to a car or a person can monitor its health has been around for more than a decade, including how the results of that information can encourage the owner to use it more responsibly.

Arguably however, it has taken insurers until now to wake up to the fact that these insights will let them develop products in a different way altogether. The stumbling block has perhaps been that older, legacy-based, conservative insurers have had difficulty in becoming the consumer’s lifestyle ‘friend’ in an authentic way. This has opened the door for disruptive startups to lead the charge.

“The bar is set really high today with regards to communication. Customers have exacting standards for how they’re talked to. They want a dialogue instead of just one way dictation. They expect brands to have a measure of authenticity,” states Gabrielle Hase, CEO of CatDogFish, a startup pet insurance company that she believes is part of the new breed of data-driven insurance service providers.

Consumers are aware, just as in the Sonicare example above, that all companies are after their data, not just insurers. They are willing to share it with some more than others.

Sabine VanderLinden, Managing Director of Startupbootcamp InsurTech adds: “If a service provider seems honest, consumers are readily willing to share their data – look at Google. The problem is that no-one truly trusts insurers. This is why the industry needs a little bit of a makeover.”

It is a delicious irony that the customer is willing to share their information with an online retailer with no physical shops (Amazon), a taxi firm that didn’t exist three years ago (Uber) or a company whose reason to exist is to sell advertising off the back of it (Google or Facebook) and yet mistrusts an organisation that exists to solve problems they can’t manage on their own.

2 https://techcrunch.com/2015/09/17/clover-health-a-data-driven-health-insurance-startup-raises-100m/


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The problem is that consumers have yet to see the value exchange for their data where insurance is concerned. It is certainly there in repairing flood damage or covering injury in car accidents. But for the majority of customers who don’t claim, that value isn’t seen in 10 years of religiously paying premiums with nothing to show for it in return.

This is why insurers have woken up to the need to deliver a service proposition that goes beyond renewal and claim.

Even then, acting on the insights these new data streams provide has proven challenging for the established businesses. To provide the seamless omnichannel experience delivered by Amazon, Uber or Tesla requires a start-up frame of mind.

“From our work reviewing a thousand InsurTech start-ups last year, at least half these are data-centric. Insurers are looking for existing data sets but also for external sources and things they might not have thought about that can change customer behaviour. One of our start-ups is focusing it’s effort on shrinking personal indemnity claims and changing the behaviour of the claimants who may remain out of work for years. The purpose is to nudge the claimant back to work earlier. You need different sets of data to do that. But insurers are very risk-averse, so the challenge when you have a long-tail project like this is that they want to obser-vie the patterns from the data and also want the time to decide whether or not the underwriting decisions are accurate. We don’t have the luxury of time in this fast moving market though,” VanderLinden warns.

She adds: “Insurers have challenges solving important operational problems because of culture, set up and mindset. Because they are resource-constrained, start-ups have to focus on speed and agility. This means that the way they address business problems is very different to corporate departments. They think lean and deliver things cheaper, faster and better.”

Paolo Cuomo, COO of Charles Taylor Managing Agency acknowledges just this issue. His company operates in the much more traditional Lloyds underwrit-ing space and works heavily on B2B risk such as energy and marine. Yet he is not wanting for data and can bring in insights about operating conditions and company assets in his field - marine insurance - that can inform how the company works with its customers in the future. He can identify where problems might happen, before they happen, thus improving his customers’ exposure to risk, reduc-ing inconvenience and loss to both client and insurer. But, that said: “Data helps us get a better sense of our exposure to risks. It’s not a point that’s hard to get your head around. But, it’s difficult to execute.”

To this end, VanderLinden suggests larger insurers should be working with start-ups to embed this agility without taking the larger company apart or start-ing afresh. “Corporates should be working with start-ups to learn how to solve problems using start-up methodologies. Engaging in partnership is part of the equation too. Insurers can collaborate and embed start-ups thinking and capabil-ities within their business. This requires a culture of change though despite years of building processes and internal boundaries to manage uncertainties; involving start-ups in-house can drive employee inspiration and show that there isn’t just one way of doing things.”


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For Cuomo it’s primarily about instilling a data-curious culture, something he feels is still lacking in some quarters. “You have to have a data-driven curiosity through-out your business. If you want to be more data dependent it’s not simply about asking the actuaries to use more data. It’s about getting everyone to learn that the data is really important. There needs to be a data mindset and everyone talking about what they want to achieve.”

It’s clear the market is moving apace. Even notoriously private German custom-ers are being let in on the act, as the Financial Times reported in June 20163 that Generali, an Italian health insurer, was discounting individual insurance premiums based on the amount that a person exercises.

Generali receives information from IoT devices such as Fitbits to determine how much discount each exercise-conscious customer should receive. It is part of the Vitality brand that already has 3.6m users in the UK and South Africa, but the data-sharing-averse Germans will prove to be the litmus test.

Hase’s pet insurance product is just the beginning and, with the luxury of a startup’s clean slate, she is determined to start as she means to go on. “We want to change the relationship between insurer and customer. We are a pet wellbeing brand and insurance just happens to be what we’re launching with. We are looking at the full healthcare cycle of a pet, and the relationship with the customer goes far beyond transactional. The onus is on us to demonstrate how much we care, even when that pet is gone. How do we handle the owner’s grief?”

Personalisation is going to be at the heart of the new data-driven insurance paradigm: understanding how customers need to be covered, and how to keep pace with the changes in their lifecycles not just on a yearly basis, but on a monthly and even weekly basis.

“We can get very personalised about how customers are treating their pets. What is the environment they live in, what life does that pet lead? Is it an indoor or outdoor cat? What other animals share the house? We’re not there yet and the privacy issue is a huge thing. There needs to be honesty and transparency in the dialogue, but people are happy to share data if the quid pro quo is worth it,” CatDogFish’s Hase reveals.

There is nothing in the technology to hold insurers back from achieving this. Advances in data management and explorations into areas such as the Blockchain mean there is no reason insurers can’t personalise to the level of one customer per minute. A skiier can walk off the slopes and their coverage can change from sports accident prevention to theft or health related to apres ski - just by virtue of the data supplied in real time from their mobile phone’s built-in accelerometer.

Charles Taylor’s Cuomo adds: “There is so much data out in the world and the people who are going to be successful are the ones combining proprietary data with what else is out there. No-one will be successful on their own data alone. The mash up of proprietary and publicly available data to derive insight that no-one else could have done is where people start to differentiate themselves.”

3 https://next.ft.com/content/b539ec08-3897-11e6-9a05-82a9b15a8ee7


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Insurers are desperate to find ways to stay relevant and at the moment they’re on the back foot. They only have the 20 or so points the customer shared when they applied for that policy. They don’t have access to Hive home management data or other solutions.

“The smart home revolution could be led by utilities, insurers or even consumer goods manufacturers. The insurers are going to be spending a lot of time identify-ing why they should have the right to take control of this area all the while trying to make sure that they DO take control of it,” Cuomo states, adding: “Insurers are not retailers. They need a complete rethink about their business if they’re going to become service providers. But there is a compelling story for becoming lifestyle concierges, helping to focus on customers’ management of risk. Right now, they’re not doing a great job of it but the smart ones will get better.”

While product innovation resulting from increased data insights undoubtedly brings new opportunities for insurers (provided they can adopt the right mind-set), there are also clear challenges. As IoT devices becomes more closely interlinked with insurance products the question of who owns the relationship with the customer arises.

As mobile phone companies already offer insurance products, will they start to own the customer’s household needs, their car needs and with the quantified self apps, even their health?

Startupbootcamp’s VanderLinden concludes: “In the automotive insurance market-ing will we have cars to insure? Are we going to move from car to liability insur-ance? When we start owning large varieties of IoT devices within our homes will we find it easier to get insured by Samsung or Apple? Are product brands going to own the customer engagement and therefore the interaction value chain? Data is going to help define new types of products. It will also force industry players to innovate around the value chain. Maybe more insurers will consider to engage in white labelling relationships. But above all, the products will be more personal and, for forward-thinking insurers, more preventative.”

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3rd Annual Insurance Analytics Europe SummitData-driven product development will be discussed at the upcoming Insurance Analytics Europe Summit (5th & 6th October, London) featuring industry leaders speaking from Aviva, RSA, Generali, Hiscox, XL Catlin, Swiss Re and more, including:

Along with product development, the conference will provide exclusive insights on:

■ Turbocharging Analytics Capabilities across core insurance departments to drive a competitive advantage: underwriting, pricing, claims, fraud and marketing

■ Industry Innovation: New insurance products, business models, start-ups, technology and trends that are impacting insurers

■ Becoming a Data-Driven Insurer: Data visualisation and governance strategies to put analytics in the hands of internal end users

■ Emerging Technologies: Blockchain, machine learning, process automation, programmatic product development and more

This Summit is a Must-Attend for Senior Insurance Executives, with Responsibilities including:

■ Analytics ■ Data ■ Digital ■ Technology

■ Innovation ■ Actuarial ■ Underwriting ■ Pricing

■ Claims ■ Marketing ■ Customer

For more information, including the conference agenda and speaker line-up, please get in touch or visit http://events.insurancenexus.com/insuranceanalyticseu

Contact Us:

Emma Sheard

Head of Strategy Insurance Nexus

(A Division of FC Business Intelligence)

T: +44 (0) 207 422 4349

E: [email protected]

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The New Age of Personalised, Data-Driven Product .../media/images/members centre/white...The New Age of Personalised, Data-Driven Product Development in Insurance 4 3rd Annual Insurance