DRIVING TRANSFORMATION IN THE INSURANCE SECTOR THROUGH TRUSTED DATA AND TECHNOLOGY

R&C: What do you consider to be the most important new sources of data for insurers? Why does the insurance sector need these data sources now?

Austin: We would define ‘new’ sources of data as ‘non-traditional’ data, as opposed to standard economic and demographic data, which insurers and actuaries have been using for a long time. Some of these forms of non-traditional data, from third-party marketing databases, for example, have been available for decades, and it is how we use them that has changed. Data about what we believe – behavioural data – and how we think – psychometric data – are relatively unexplored in the insurance context and so far, and are proving to be quite predictive. How we collect this and the speed with which behavioural data can be operationalised make it an exciting new source. Data sources that allow for better pricing of risk and identification of poor risks are needed for two key reasons. One is because people’s behaviour, such as purchasing and driving, has been so different during the pandemic that it has made some data sources, such as credit, less powerful. The other is that now the pandemic has pushed more purchases online, it is harder for insurers to really know their customers. When are they confused? When do they need help? Would a different product be better for them? Are they sincere? It will also allow insurers to tailor and improve an individual customer’s experience to suit them and potentially reduce costs by identifying and focusing on customers most likely to buy. This is all important as the insurance sector rebuilds for a post-pandemic world.

McMahon: First-party data is rapidly growing in importance to the insurance industry. Insurers that utilise first-party data, or data collected from their customers directly, can better understand the way the data was collected, the strengths, weaknesses and biases of the information and better enable transparency to their customers based on how the data is used. Furthermore, first-party data enables an insurer to build competitive advantage as they can provide improved products and services at better prices than competitors when they apply first-party data effectively. Individual driving risk is an example of first-party data that is growing significantly in usage by insurers to offer competitive products to their customers.

Oct-Dec 2021 Issue

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