Advanced data handling capability: The missing piece to the insurance coverage-gap puzzle

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As the insurance risk landscape quickly evolves, most policyholders feel inadequately covered for emerging risks. How can insurers close the coverage-gap?

More than 85% of individual customers said they have medical and health risk exposure, but only one in 10 believe their policy adequately covers their risk, according to the World Insurance Report 2019 (WIR 2019) voice of the customer survey. Moreover, 83% of individual policyholders and 87% of commercial customers expressed concern about cyber-attack exposure —with only 3% (individual) and 18% (business) believing their coverage is comprehensive.

The industry has reached a critical point and now more than ever, insurers must leverage emerging technologies to capture data from new sources to generate deeper and actionable insights and design new products and experiences. These actions are essential for closing the coverage gap and remaining profitable within today’s dynamically changing risk scenario.

Data – The new gold

Data has become a precious commodity that offers insurers granular insights about the risk landscape and changing customer preferences. Around 65% of insurers interviewed as part of the WIR 2019 said they are leveraging new data sources (such as that derived from social media activity and online shopping behavior) to gain insight into customers’ expectations as well as potentially risky behavior.

Key capabilities implemented by insurance firms (%), 2019

Key capabilities implemented by insurance firms

Source:  Capgemini Financial Services Analysis, 2019; WIR 2019 Executive Interviews, 2019

In addition to understanding customer preferences, risk control and proactive risk prevention techniques are critical capabilities for insurance firms to reduce loss incident frequency and severity. Personalized services will also bolster customer loyalty.Source:  Capgemini Financial Services Analysis, 2019; WIR 2019 Executive Interviews, 2019

Insurers lag in real-time data handling implementation

Real-time data handling capabilities are essential for improving the efficiency and effectiveness of risk control and prevention activities. Emerging technologies such as connected devices can capture customer data in real time. Insurers that use connected devices to monitor customer risks in real time can offer policyholders timely alerts/assistance to prevent or reduce the impact of a loss incident.

For example, GuideOne, one of the largest church insurers in the United States, partnered with Roost Home Telematics to provide smart water leak and freeze detectors to policyholders. Roost sensors alert customers (via mobile app) about building leaks as well as humidity and freezing temperatures.[1]

However, less than 50% of insurers participating in the WIR 2019 said they monitor risks in real time for risk control and prevention.

Emerging technologies enable insurers to get the most from captured data

Not all insurers that capture data have the necessary capabilities to generate deeper insights. While more than 65% of insurers tap customer data, only 54% have implemented behavioral analytics to identify trends in customer behaviors and patterns. Insurance firms can leverage machine learning, artificial intelligence, and advanced analytics to analyze trends and patterns in the data captured.

In addition to identifying trends in customer behaviors, advanced technologies can also help insurers quantify evolving and emerging risks. For example, leveraging advanced analytics, London-based insurance broker Aon has launched a solution to help insurers obtain more clarity into their cyber exposures with the option to exclude or recognize vulnerabilities in each portfolio, and then evolve their cyber protections accordingly. The solution empowers clients to strategically underwrite cyber risk across all lines of their portfolios with greater certainty.[2]

Automated risk assessment systems based on artificial intelligence and machine learning can analyze data from various sources and quickly assess the risks more accurately. For instance, risk assessment for personal and commercial properties can be handled using new data sources such as images from drones.

With automated and accurate risk quantification, insurance firms can profitably tighten their pricing strategy. However, less than 30% of insurers interviewed for WIR 2019 have implemented automated risk assessment.

Generally speaking, many insurers support initiatives to tap new data sources but don’t have the advanced analytics capabilities necessary to generate insights from the data. Few insurers have invested in real-time data-handling capabilities, which can significantly improve risk prevention and quantification efforts. Insurers must harness the power of emerging technologies to build real-time data capture and advanced and real-time data processing to close the coverage gap perceived by customers.

To learn more about how insurers can develop their key capabilities, download a copy of the World Insurance Report 2019.

[1] GuideOne Insurance press release, “GuideOne launches commercial property insurance deployment with roost telematics sensors,” February 13, 2018, https://www.guideone.com/about-guideone/newsroom/guideone-launches-commercialproperty-insurance-deployment-roost-telematics

[2] Insurance Journal, “Aon Creates $350M of Cyber Capacity, Launches New Solution for Silent Cyber”, September 7, 2018, https://www.insurancejournal.com/news/international/2018/09/07/500427.htm

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