Reshaping The Future of Insurance with Big Data
Updated: Feb 12, 2020
Reshaping The Future of Insurance with Big Data
The Thai insurance industry has enjoyed continuous growth and transformation within the past years. This growth is influenced by several factors including government policies that encourage people to invest in insurance, more Thais are becoming aware of the importance of insurance, and technology is paving the way for insurance companies to engage with customers. Since technology is becoming essential in Thai consumers’ daily life and is now changing the way consumers behave, the insurance industry has been completely disrupted by digital technology or, in other words, insurance companies around the world are applying digital technology in their business (as known as insurance technology). Similarly, many insurance companies in Thailand have started to adapt to changes in consumer behavior by using technology to drive business growth, create customer loyalty and allow customers to interact with their product and services easily.
Insurance and market evolution
Consumers currently have more knowledge and understanding of insurance products as well as the ability to search for information over the internet. This creates a higher competition in the insurance market and are driving each insurance companies to use an outside-in approach to marketing or a customer-centric approach. As a result, new products are being created in the market such as on-demand insurance program that allows customer to choose insurance duration, scope, or benefits suitable to customer’s behaviors and lifestyles. Other products include a mobile application that allows customers to get car insurance claims such as Claim Di, Me Claim, and Roojai.com. Being able to request insurance claims over these apps is very convenient for customers and reduces waiting time.
In the past, insurance companies have limited information on cosumer’s behavior even if they were already collecting claim statistics, insurance purchase history as well as continuously assessing consumer’s risks. One of the major reasons for this limitation is that customers usually purchase insurance via a broker or an insurance representative, which leaves less room for insurance companies to learn about customers directly. Now that insurance companies are focused on learning about consumer’s behavior, they have added new sales channel over website or mobile application, and various customer relationship management (CRM) programs in order to interact with consumers directly. Consequently, insurance companies can now collect customer behavior data for more accurate analysis and recommend products and services that will interest them.
Analytics and digitizing insurance Big data has been used to improve customer relationships and reach the right customers in the insurance industry. In the past, insurance companies collected personal information, loss data, credit scores, and other data for risks assessment in order to calculate premium rates. Insurance policies are also based on internal data analysis such as accidents statistics, personal information of policyholders, and third-party sources, which helps insurance companies to divide customers into groups based on the types of risks and fraud prevention strategies.
The rapid transformation into digital society has created new sources of information that can be used for a more accurate analysis of each customer’s complex behavior and evaluate their risks. For instance, Zebra, a search engine for car insurance in the US, has reported that the US’s car insurance industry has used data of 250 million drivers to analyze their behaviors and digital footprints in order to calculate car insurance premium rates. Zebra’s report reveals how consumer’s preferences or “digital footprint” behaviors, total of 35 factors, can indicate each consumer’s risks and how much they need to pay for their insurance. Here are some examples:
Android smartphone users have the potential to pay an extra 32 USD for insurance premium as compared to iPhone users who can pay an additional 70 USD per year.
Gmail users has the potential to pay an extra 100 USD for insurance premium.
Consumers who searched about insurance online at 9:00 am may receive a discount of 17 USD, while consumers who searched at 3:00 am will have to pay an extra 58 USD for insurance premium.
Source: How Your Online Behavior Could Affect Your Car Insurance Rates, Infographic by The Zebra
Moreover, as consumers’ behavior changes throughout their life, the conventional insurance companies with limited propositions can no longer serve the needs of their customers of different age groups. This has pushed many insurance companies to identify consumer’s behavior from online sources such as social media activity, online shopping behavior, and browsing activities to understand the different aged groups’ needs.
It’s a win-win situation for both consumers and insurance companies
If insurance companies can understand consumers’ behavior and needs correctly, it will help them interact with the target groups that are interested in the product at the right time. This can also help the company save costs by not reaching out to customers who are not interested in the product. Often times, consumers are bothered with products that are not relevant to them and this creates a bad impression on the company.
Some insurance companies are trying to motivate customers to live a healthier lifestyle by offering different health programs to them. When a customer joins these programs, their behaviors and health data will usually be collected for analysis as well as for recommending products or benefits that are relevant to the customer such as discount on health insurance and discount from partners. Overall, it will benefit the customer as their overall health will improve and they can save cost from health expenses while insurance companies will indirectly save cost on insurance claims.
In order to fully realize data analytics capabilities, insurance companies must transform their internal systems to support efficient online transactions and move towards a successful future. System development will require investments in terms of core system, database, data analytics, digital sales/service platform, and mobile applications. In the future, when all of these systems are truly integrated, the data we have can be used to improve products, lead management, sales management, risk analysis, underwriter, customer services and calculate insurance premium rates. All this will be the starting point for digitizing the value chains of insurance companies and contributes to improving the flexibility and efficiency of the business.
The Future Trend of Insurance in Thailand
Although digital insurance in Thailand is still at a beginning stage, insurance companies are still selling insurance via online channels as well as using chatbot to answer customer questions about insurance policies or to sell a product. In the future, insurance policy offerings and setting insurance premium rates will be determined by big data and AI, which will clearly disrupt this industry. With access to more data and the ability to analyze important data, insurance companies will have more tools to evaluate customers, improve evaluation process, and setting coverage amount. For example, in setting coverage amount, a prevention-based approach will be applied with the current evaluation model: giving discounts according to customer’s behaviors (exercising, involvement in different activities, or even driving behaviors such as speed and distance of driving). What’s more, big data and AI can filter and calculate insurance premiums accurately to serve customer’s demands.