Insurers Know Their Customers Better Than Ever: Can Losses Fall?

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If you are a parent, you experience great anxiety--and remorse--when your teenaged child pretends to listen to your safety warnings and promptly does exactly what you’ve told him/her not to do, resulting in their injury. The same can be said of insurers that watch their policyholders conduct themselves in an irresponsible way, ultimately injuring themselves or others.

I’m convinced that various subsets of our culture may not be capable of heeding warnings: storm chasers are compelled to risk their lives chasing tornadoes, campers continue to feed black bears, homeowners refuse to evacuate in the middle of a firestorm, and too many teens and adults alike continue to text while driving.

In years past, more than one insurer has told me that the greatest technology in the world won’t reduce the number of claims related to the “human choice” factor. Today, that’s a different story.

IBM is in the middle of a multi-media campaign to promote what it’s calling a cognitive “insights-as-a-service” offering, which includes hyper-localized content to create tailored marketing messaging aligned to a host of data sources (social, demographic, weather, emergency management, and Internet of Things).This is not big data used to improve claims processing per se; this is big data that has the potential to identify pockets of risk and develop specific and customized communications just for those pockets. There are plenty of warning messages that can be deployed to groups of insureds in the path of a tornado. But imagine your teenager getting a text from his/her auto carrier as they start their car engine, reminding them to turn their phone off NOW.

The use of a combination of GPS and advanced analytics to identify pockets of risk and develop specific “marketing” messaging based on proactive education about safety is already in play at many leading insurance companies. And it truly gives new meaning to the phrase “know your customer” (KYC).

For example, as part of its strategic plan, United Educators, which provides liability insurance to schools, colleges, and universities, has a progressive technology strategy that employs data analytics and business intelligence as part of an integrated approach to the insurer’s greater business objectives.

Moving beyond a pure services function toward providing strategic value to the institution, UE’s data analytics and risk management teams work in tandem to identify the most acute risks in need of safety-related education. But they don’t stop there: The insurer tailors its messaging campaigns to educate students of certain age groups on prevention and protection—such as the risks inherent in attending school away from home (drinking, sexual misconduct, etc.), the risks associated with traveling to and from school, etc.

When all is said and done, policyholders will continue to make questionable choices and exhibit unsafe behaviors. And it’s a matter of fact that the latest in data analytics (even as a service) alone will not suffice as a risk management tool, and it won’t single-handedly change the behavior of covered individuals. But if it is used to uncover individual characteristics at a granular level and combine that information with a larger and consistent messaging effort that targets specific behaviors of specific individuals or groups of individuals, insurers at least have a running start at reducing frequency or severity of loss.

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