The ongoing and lasting effects of the pandemic, lifestyle changes, technological innovations and the needs created by climate change, demand an instant and constant picture of risks and exposures across an insurance provider’s entire portfolio. In an ever-changing, turbulent global economy, the insurance industry will increasingly harness data to meet the growing expectations and demands of increasingly switched-on consumers.
1. Utilizing data to better manage risk associated with extreme weather events
Extreme weather events in 2021 resulted in annual insured losses from natural catastrophes of an estimated $105 billion, according to a new report from the Swiss Re Institute. That’s the fourth-highest loss since 1970. In the U.S. alone, 2021 saw 20 weather/climate disaster events with losses exceeding $1 billion each. As weather-related events rise in severity and frequency, insurance professionals must understand the risk at all stages of the insurance continuum – application, quote, claim and each point in between.
This is where the evolution of geospatial data intelligence and data visualization tools come into play. These, along with the emergence of increasingly sophisticated property and vehicle-centric data, are helping to provide that total, top-down overview to help immediately understand risk at whatever point it is needed, and whenever it is required, in the customer journey.
Take the example of an approaching storm. Critical geospatial data, including near-real-time data on flood warnings and the related tools that predict and visualize at-risk areas, are now being used in tandem with insurance providers’ own customer data to forewarn individual commercial property, homeowners and vehicle owners as events occur. In turn, policyholders can take preventative measures to minimize harm to themselves and their belongings.
This upfront knowledge via data streams allows insurers to mobilize emergency recovery teams as well as expediently begin the claims process, which is critical when you consider that 50% of all home insurance losses in the U.S. are weather-driven, according to the 2021 LexisNexis Home Trends Report. Post-storm, the emergence of highly sophisticated risk assessment tools, which combine aerial imagery with claims insights to help make informed new business and renewal decisions, are becoming more important than ever.
2. Changing driving patterns, behavior through advanced safety features
It’s not just the weather that is challenging insurance risk specialists. COVID-19 and stay at home orders across the globe led to changes in driving patterns early in the pandemic, with a reduction in traffic volume meaning fewer accidents and consequently low claims volumes over the course of 2020. Alarmingly, as driving patterns returned to normal in 2021 and more claims were filed, claims severity remained abnormally high. In fact, through Q3 2021, the U.S. saw the most traffic fatalities over its first nine months since 2006.
Insurance professionals can keep pace with changing driving patterns and behavior through adjusted risk profiling thanks to innovations in telematics-based data. Alongside driving patterns and behavior, we see a change coming in how we can view the safety features of a vehicle and how they’re used through telematics-based Advanced Driver Assistance Systems (ADAS) data – or dynamic ADAS at the VIN level. Dynamic ADAS allows us to know the safety features that were built into the car and also how those safety features are used. In that regard, we may be on the cusp of a transformation in the way insurance risk is understood.
Driving behavior data is now available at the point of quote and at renewal all within an insurer’s workflow and will only grow from here thanks to data from connected vehicles and other aftermarket telematics programs, made available through platforms like a telematics exchange. Telematics exchanges help carriers increase their speed to market by offering telematics enhanced policies for their customers. These policies help maximize their investments and help give them an edge in retaining customers, while also capturing new potential policyholders. For consumers, exchanges make telematics data portable by offering them the opportunity to use their driving behavior and vehicle data when shopping for insurance to help take advantage of safe driving.
3. Handling COVID-19-based risk now and into the future
It’s no secret the pandemic has shifted the way many of us work, and with the virtual workforce growing around the world, new risks have arisen in home and commercial property insurance. The U.S. home insurance industry’s respite in 2019, which saw decreases in loss cost and frequency, was short-lived. Loss cost and frequency across all perils rose again in 2020, in line with an upward trend over the last six years, according to the Home Trends report.
Working from home has become permanent for many people, and workspaces will need to adapt to a more transient workforce. Again, this shift in working patterns is creating changes in insurance risk that are demanding deeper insights related to the person, the property and the peril ––from highly granular property characteristics data to industry contributed claims insights related to the person and the property.
We also need to consider how the commute for many people has now become a quick walk to a home office space. As mentioned, telematics and connected car data mean insurance professionals can offer a more personalized, usage-driven policy based on when and how a person is driving, providing a fair policy outcome for insurer and driver and can be vital peace of mind for both.
Finally, the pandemic has also made people think about their own mortality. This has an obvious impact on the demand for life insurance as people invest in policies that can be a financial lifeline for their family. The use of behavioral and medical data such as credit attributes, driving violations, prescription history and medical diagnosis are all critical in the swift and accurate risk assessment of a life insurance policy. With the global life insurance industry being hit with 5.5 billion reported COVID-19 claims in the first half of 2021 compared to 3.5 billion for all of 2020, it is obvious why using data to help accurately predict risk in this area is vital.
4. Using the right data at the right time in the right place
The past two years have demonstrated how quickly things can change and how the insurance market can no longer rely on assumptions and patterns of the past to forecast future claims outcomes. Insurance providers are entering a new era in insurance risk assessment.
Many traditional underwriting data points were disrupted, consumer shopping behavior changed, and customers needed to be serviced in a more virtual way.
With the total cost of insurance fraud estimated to be more than $40 billion per year frictionless identity verification using email intelligence has become a much higher priority for the market to offer customers a streamlined online application and quote experience while protecting itself from identity fraud.
At the same time, the industry is embracing opportunities to share data through market-wide contributory databases as well as new uses of contributory data through predictive attributes or predictive models. Whether that’s policy history, quoting activity or claims – market-wide data can help fill important gaps in knowledge about new customers to help ensure they are offered the right products at a price that reflects their individual risk.
5. The ‘holy grail’ of the single customer view – and the benefits for both insurer and consumer
With the insurance industry facing risks on so many levels, the reliance on data has never been as great as it is now. It would be easy to be overwhelmed by data in this market. So, what is the secret to using accurate data?
We are seeing that a single view customer can emerge as the industry’s data holy grail. This single customer or consumer view involves linking and matching technology to bring all disparate data points about existing consumers together to create one ‘golden’ record. This can then help form the foundation for every interaction with that consumer going forward.
It then comes down to using insurance-specific data to enrich customer data – data that has been viewed through the lens of the underwriter, pricing manager and claims professional. It needs to be injected at the right points in the customer journey, helping smooth the customer experience, such as knowing they had been a previous customer. Used insightfully, it has the promise to make the customer application and onboarding process swifter and help alleviate considerable stress from a claim, helping win over tomorrow’s consumers and making insurance something people really value and appreciate.
Source: Digital Insurance
