There is new demand for insurance that is personalized, convenient, transparent and flexible, say authors of a recently published report from the IBM Institute for Business Value. That said, insurers need to redefine their relationship with data and embrace new data sources in order to innovate.
The report, Personalization, platforms and data-designed offerings: The new generation of insurance, suggests that 71 per cent of insurers already have data-centric products and services in their portfolios, but many still lack insight into what data is essential to own, when it is acceptable to use it and when it is advantageous to share it.
“Insurance products and services have been tested on an unprecedented scale by the COVID-19 pandemic,” says the report. “Customers emerging from this experience are more attuned to their real insurance needs. Demand for next-generation insurance such as on-demand or usage-based products and parametric insurance is rising.”
Complexity drains engagement
More, they say complexity drains customer engagement. “Simpler insurance products and clear coverage descriptions can help build customers’ trust and understanding. Seeking personalized coverage, customers are expecting insurers to respond with a new generation of insurance centred on connecting with customers and limiting losses. Technological advancements related to sensor capabilities, analytic insights, and data accessibility make it feasible to put data at the heart of products and services.”
Insurance companies, however, would appear to be behind in meeting those needs and demands. IBM says only 26 per cent of insurers say new products and services are a differentiator in the marketplace, while 50 per cent say they are moderate differentiators. A surprising 24 per cent said such products and services provide little or no benefit, “suggesting that the potential to expand product portfolios remains largely untapped for the majority of insurers.”
Data-centric products and services
The report also looks at the shift insurers need to make from using retrospective data to using real-time data, at the efforts needed to modernize data use for products and services, and at the new portfolios insurers could create would they adopt more data-centric policies. “Our research shows that 71 per cent of insurers have data-centric products and services in their portfolios. These offerings tend to generate more of their income and be faster to market than those of insurers without data-based offerings: Their new products and services launched in the last 12 months yielded 25 per cent more revenue and 33 per cent more premium and had shorter development cycles, with products taking at least seven per cent less time to launch,” says the report.
“As to why 29 per cent of insurers are not yet offering data-based products and services, most say such offerings are not compatible with their core competencies or part of their product strategies. Although these insurers may represent a characteristically risk-adverse corner of the industry, we believe they are putting themselves at risk of eroding competitiveness and failing to meet customer expectations.”
