It’s been said for some time now that data is the new oil – the vital commodity that fuels the global economy. Indeed, in today’s digital economy, Big Data holds the key to value creation across industries, unlocking better customer journeys, smarter business decisions, and new revenue opportunities.
For the insurance industry, working with vast amounts of data is nothing new. Indeed, statistical risk assessments have long been at the core of the industry’s business model. But technological advances have unfolded at a dizzying speed over the past decade – to say nothing of the five centuries since the modern insurance industry took root. And while breakthroughs in fields like artificial intelligence, the Internet of Things, data analytics, and telematics have generated troves of new data and opened crucial opportunities for the industry, they have also presented new challenges such as instilling cultures of innovation, upgrading core systems, and establishing effective, efficient workflows.
As a recent Deloitte analysis noted, it’s one thing for insurers and other financial institutions to have access to large quantities of data, but it’s quite another to build the data infrastructure required to yield the kinds of actionable insights that will actually improve business outcomes – let alone to build new, data-hungry products and service offerings.
How, then, can insurers overcome these challenges and extract the most value from Big Data? The answer lies in intelligent core systems that will support continuous innovation.
Data as a Value Proposition
Getting the most out of the data that’s available to insurers requires digital transformation – not merely the introduction of a handful of flashy digital tools, but a digital-first mentality at every level of the organization. This has been no small challenge: While insurers have been making significant investments in innovation, for many, it took the COVID-19 pandemic and the ensuing shift to remote operations to catalyze the necessary change in mindset.
In the ‘new normal’, it’s all the more imperative for businesses to move nimbly and strategically. To make smart decisions on the fly, data is indispensable. This data must go beyond the internal data traditionally collected by insurance companies. Drone footage, for example, can be leveraged to assess a car insurance claim after an accident. IoT sensors can proactively alert homeowners to flood risks, preventing the need for costly payouts. As a McKinsey analysis noted, insurers can also make use of data sources not directly related to risk assessment: For instance, because it is now very easy to know when a home has been placed on the market, a home insurer should be able to quickly engage the homeowner with an offer of coverage for their next home.
The bottom line? In a world that’s swimming in data, insurers need to provide a more proactive service and not just be there for coverage when something goes wrong, but have numerous touch-points and utilize their data to provide constant value”
Breaking the Analog to Digital Barrier
Long seen – not entirely unfairly – as an analog industry, the insurance industry has been heavily reliant on paperwork and in-person interactions – but with today’s consumers expecting seamless, efficient customer journeys, 24/7 availability, and minimal friction, this has become increasingly untenable. Breaching the barrier between analog and digital has become a matter of basic survival.
Not only can automating processes like claims yield cost savings as high as 30 percent, it enables the faster response times that customers expect. To unlock the benefits of automation, insurers must lay the groundwork with a strong digital core – one that makes it easy for the company to introduce new lines of business, roll out product upgrades, and integrate new data in real time. A quality core system will serve as the foundation for data-driven innovation and digital-first products, empowering insurers to evolve in tandem with customer expectations and shifts in the competitive landscape.
While this digital-first model will entail more automation and greater use of technology, the role of the insurance professional will remain vital. It’s the human professional – not the machine – that is best-positioned to think empathetically about customers’ needs and wants, to evaluate changes in the market, and to ask the smart questions about which areas are most ripe for investment in innovative new products and processes.
The fusion of human and machine intelligence, backed by best-in-class core systems, is the future of insurance. While it’s impossible to know all the ways in which insurance will change and evolve in the coming decades, it’s beyond dispute that data will be key and that in navigating the road ahead, success will depend on this open, innovation-driven mindset.