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What The Future Holds For A Data-Driven Insurance Industry

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June 1, 2021

Data and innovation, two topics that are at the forefront of most business conversations during the ‘great digital transformation’. True to our nature as a forward-thinking company, and with the help of our industry experts, Jannie Els and Jurgens Els, thought leaders of Apeiros, we’re exploring the future of data innovation, specifically the importance and role of data strategies in the Insurance industry today.

You can read more about Jannie and Jurgens’s experience, backgrounds, and passions below for anyone who doesn’t know the team.

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“Data Strategy” is kind of a buzz term that’s out there, and everyone’s got their definitions. Bernard Marr, a pioneer in big data and business strategy, believes that every business is a data business, and an Executive cannot successfully steer their business if they do not use or have access to their data. Regardless of their industry or the nature of their business, it’s every Executive’s lifeblood. 

Companies require a data strategy that supports the overall business strategy, as this enables the Leadership team to understand where the business’s information comes from, how it’s governed, how it’s used, and what is owned versus third party data. The right data strategy will help answer key business questions and help them deliver on their strategies.

Very few companies think about Data Strategies this way, they see data as something that is part and parcel of their other strategies, but they fail to mainstream data as an asset. For the team at Apeiros, and in practical terms, a Data Strategy is the strategic management of your data to use for the intended purpose of growing your business.

Data Strategy is a foreign concept to most that do not form part of the Executive Team. According to Jannie Els, Director of Apeiros, the biggest misconception about a Data Strategy is how many working parts there are to this entire machine. In essence, there are three vital strategic components: your data, your analytics and your technology strategies (DATS). Companies that don’t give focused attention to DATS often haphazardly use their data and can sometimes be successful; however, documented strategies are proven to lead to exponential business growth.

The two significant challenges Executives face when formulating a Data Strategy are;

  1. Addressing the lack of knowledge on how best to store the data and how to use it.
  2. Then, Executives are unclear on how to leverage their data.

At Apeiros, we recommend that companies enhance or expand their business strategies to link data, analytics, and technology intricately. Dynamic strategies encourage companies to evaluate and use data to continuously augment their strategy to respond to industry events, market movements, technological advances, and internal company dynamics.

Business strategies are designed, formulated, and documented without thinking about how DATS currently supports them and what augmentation needs to deliver on the business strategy. If you have a good data strategy, it feeds into and supports your business strategy. If it’s working like a well-oiled machine, it’s going to accelerate your business growth.

For example, traditional insurance models are threatened by the availability of reams of data, much of it real-time, to mitigate risk. 

The Internet of Things (IoT), advanced analytics, automated technology, big data, and more innovations are shaking up the insurance industry. These trends that come under the Industry 4.0 umbrella can bring considerable benefits to companies, but they are not without disruptions and challenges to overcome. 

The prospect of leveraging Big Data to create new products and new markets, and to radically change how customers perceive insurance excites us.

Big Data from customer assets like cars, homes, and businesses could enable insurers to better analyse risk and anticipate incidents before they happen.

Usage-based insurance pricing is the most dramatic example of the power of Big Data in insurance explained Tom Warden, former Chief Data Officer at AIG Life and Retirement in an exclusive interview with Forbes.

He goes on to explain, “Not only is the amount of data massive, there are great opportunities to contextualize the driving data with external information: weather, road congestion and more. This leads to smarter risk assessment and smarter pricing. Add data about the driver’s interests, to-do lists, etc. into the mix, make everything live and adaptive and voila: you’ve created smart driving from the customer’s perspective.”

There is an abundance of untapped potential to innovate and build insurance products in today’s digital age. The value goes beyond reacting when something goes wrong to helping customers prevent it from happening in the first place.

According to Jurgens Els, Director of Apeiros, technological advancements are bound to disrupt the industry as we know it. “We are enthusiastically watching the advancement of consumer governed personal data”, he says.

What do we mean by ‘consumer governed personal data’? This is where the consumer is the owner of their data, regardless of their insurance provider. There is a wealth of data for each policyholder that can inform their customer and risk assessment profiles, but there is an issue of data ownership. Currently, insurers do not share customer information at an industry level.

The Apeiros thought-leaders envision a world where all data is stored on a cloud server linked to personal devices, an individual e-identity. All customer data will be available here, including historical data, policy and claims history, behavioural data, to name a few. When a new insurer seeks information during acquisition, the insurer will request this data from the cloud and get restricted access to the relevant information they require, with the consumer’s permission, of course. This will enable insurance companies to conduct more accurate customer risk assessments, which translates to improved claim management and more attractive premiums.

It’s a consumer governed credit bureau for insurance consumer data, and ultimately, the customer will benefit from it. There is an opportunity to monetise this data for individuals themselves. An insurance provider can purchase a customer’s data from the customer for modelling and research purposes or even marketing efforts, opposed to collecting it from alternative methods. The shift is in the ownership of personal data.

 

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