Data holds the key to invention and engagement
Swiss Re's latest sigma: 'Data-driven insurance: ready for the next frontier?' uncovers the key opportunities and challenges presented to us by the rapid digitisation and mobilisation of data, and describes how it will fundamentally change the customer experience.
Traditionally, insurers focus on functionality but research shows that more and more, online consumers look for an emotional experience and opportunity for personal growth. What customers stand to gain through digitalisation is great - a more engaged and empowered experience with greater understanding of and access to their insurance.
With the right use of data, the current single intangible transaction will be transformed to create a stronger ongoing relationship that builds trust and loyalty. It has the potential to open up new markets and channels for customers and insurers to interact.
For example, Swiss Re is currently working with a client in the ANZ market to launch a mobile app that helps customers identify their health age based on their physical wellbeing. Through the app, customers interact with the insurer daily and benefit from ongoing education and personalised health and lifestyle advice.
Firstly, what data is good data?
The short answer is everything. Any data regardless of how it might be categorised tells us something about consumers and their behaviour and helps us to understand patterns. Creating personalised data sets is hard because data privacy legislation in Australia requires informed consent and data can be poorly understood.
Will AI replace the need for informed consent?
Australians can be apprehensive about sharing data. For example, tracking car usage through telematics in car insurance has worked successfully in other markets but has limited take-up here. Are Australian consumers put off by the thought of "big brother" fearing higher premiums even though it actually results in improved driver habits and cheaper insurance?
A significant proportion of consumers want to know what data is being captured and how it is being used. They want to know that it will be stored and used in a responsible way and rigorous Australian privacy laws reflect this. However, research using that data is important to allow insurers to innovate and provide new services to those clients - this is the catch 22 of data privacy legislation.
Recent advances in privacy-aware technologies, such as blockchains, edge computing, privacy-preserving machine learning and federated learning have created new possibilities for tech savvy insurers to partner with adjacent industries with the potential to open up new and innovative customer experiences. These techniques enable us to build an understanding of consumer behaviour across multiple industries without sharing personalised data.
What's the role of AI?
Artificial Intelligence is still in its infancy but, with such potential, we start to explore its possibilities with clients.
Swiss Re is working with innovative tech partners to bring value add services to clients and help to close the protection gap. From satellite image processing to facial recognition of cattle, insurance is becoming more than pooling insurance risks. AI driven insights enable opportunities beyond indemnification toward prevention. For example, a diabetes model to identify customers with a high propensity for Type II Diabetes can be linked to a preventative program using a mobile app. Or within our insurance companies, using advanced natural language processing on a vast amount of public domain data, Swiss Re has created early warnings for changes in risk drivers.
But for many clients, Swiss Re can help with the more mundane challenge of improving operational efficiency through data integration and analytics on existing data. We have enabled clients to leverage poorly understood data using modern paradigms such as "weak supervision", semi-supervised or transfer learning. Predictive underwriting, dynamic risk management, advanced analytics on claims and portfolio in-force analytics are areas where Swiss Re has helped its clients to enhance their product portfolios, reinsurance programs and internal operations.
Where to from here?
Australia has an excellent track record of invention but we are not so good at commercialising those inventions. As an industry, we can relate. Over the past two years our priorities have been elsewhere and rightly so. The outcomes of the recent Royal Commission are being positively embedded into our operations along with vital learnings for the future of our industry.
From here, I'm looking forward to creating seamless customer journeys which draw on our smarts and digital capabilities to deliver better customer outcomes. In turn delivering efficiencies within our own businesses allowing the reallocation of resources for the benefit of the customer.
While the role of data can't be overstated, and the growth of 'digital insurers' will become more prevalent globally, a deep knowledge and experience of risk remains crucial to being a trusted, long-standing part of our industry. Access to customers and data is a compelling value-add for an insurer but it's only one part of delivering the right protection for Australians and their families over the long term.