Connectivity, big data and the Internet of Things are driving the digital evolution of the insurance industry. With so much information available, insurers now face the challenge of extracting new, more detailed insight for competitive advantage.
The Insurance market has been flooded with technology options and, not surprisingly, many are still figuring out how to effectively utilise the vast quantity of data sources available. Luckily, there are technology providers that aggregate, analyse and interpret vast datasets to help optimise risk management. Competition within insurance is fierce and a group of digital savvy leaders are emerging and adopting digital models to transform their businesses for a more sustainable future.
These trailblazers are showing the insurance market that it’s possible to:
1. Leverage large data sets quickly
The key to unlocking profits in the insurance market will always come from a more accurate understanding of risk. By its very nature, risk is behavioural. Assets move around and claims are caused by a range of real-time incidents influenced by route selection, negligence, collision, mechanical failure or piracy. With the right tools, the capacity to understand behavioural insight now exists, yet only a handful of insurers have started to access, interpret and apply them to their existing business models.
Big data analytics platforms allow insurers to efficiently combine existing risk models with claims history and dynamic third-party datasets. Doing so draws correlations that better reflect the nature of risk so insurers can identify characteristics that reveal low or high exposure.
2. Have greater control over your strategy and loss ratios
With a clear view on which characteristics are indicative of low or high risk insurers can focus resources on the most profitable opportunities, offer a competitive price and take control of their loss ratios.
The fact that data is processed in real-time allows clear strategies to be prepared in advance of broker meetings. A more confident pricing strategy allows for careful yet speedy consideration of prospective deals, re-insurance purchases and reserves.
Understanding risk from a historical perspective is one thing but, with the right technology, insurers can start to take a more proactive approach to managing loss ratios on an ongoing basis. This gives a better understanding of real-time accumulation and the changing risk appetite within the business.
3. Identify new sources of risk and develop new revenue streams
Applying these learnings at portfolio level, new sources of risk can be uncovered alongside their relative risk weightings.
With the ability to analyse the unique risk profile of each new prospective account in more detail, and its impact on the broader business portfolio, scenarios typically deemed high-risk and previously dismissed become potential new business opportunities.
Improved segmentation of the insurers portfolio also enables the development of new products and services to help bridge any gaps in cover. New services could include additional policies for existing clients, consultancy services or new connected policies for all clients.
Not only will new products generate additional revenue streams, they will also serve to change market dynamics and put the power of selection and pricing back in the hands of the underwriter.
4. Actively manage risk
So, how do you turn the statements above into something tangible?
The answer is implementing technology-enabled connected policies. This focusses on targeted coverage that reflects what an asset is doing at any given point in time. Connected insurance is already possible using existing movement data. However, increasing investment from owners in real-time sensor and risk management technology means there is scope for connected insurance policies that offer more targeted coverage to reduce loss further.
The role of the Broker in such instances would change to that of an active risk manager. Not only would they place the risk, but advise insureds of risk and loss mitigation in real-time.
Technology offers a unique opportunity to transform the way the insurance market works, driving operational efficiency and greater returns for all players.
It’s time to join the industry leading firms leveraging such platforms, or be left behind.
For those that have started to embrace digitalisation – what’s the next step?