January 5, 2023
In our modern digital world, data is the lifeblood that makes everything work – a fact that is especially true for the insurance industry. Accurate data is essential for driving informed decisions. New data sources are opening up the door to new types of insurance; creating markets and opportunities of which the industry is just now testing the waters.
The Role of Data in Quoting: Prefill and Data Integrations
Getting good data is a core challenge for insurers for both quoting and servicing. One way insurers are tackling this issue is via prefill and data integration services. Both services use APIs to fetch data, and aid in both servicing and quoting policies.
One major advantage for insurers who make good use of data integrations is a vastly improved customer experience. Nobody likes entering data manually; by connecting to data sources like Google and ISO insurers can greatly reduce the amount of data needing to be entered.
New Market Opportunities from New Data
Every new data point is a new vector or direction from which one can extrapolate new use cases by combining it with data already on hand. For example, if you add IoT mileage driven data to your existing policyholder data, you can now start to rate and charge by the month. Event-based real-time data, such as storm occurrences, makes parametric insurance possible.
Data has the power to both change the way insurers quote business and create new insurance products. Some examples of possible new insurance coverages:
- Health risk prediction: Health and activity data from tech (such as smart watches) can be used to create insurance products that cover the costs of preventive care or treatment based on an individual’s likelihood of developing certain health conditions.
- Predictive maintenance insurance: Insurance products that cover the costs of maintenance and repairs can help businesses avoid unexpected expenses and keep operations running smoothly.
- Social media insurance: Insurance premiums can be based on an individual’s online behavior, such as positive activities on social media. Customers can stay engaged and make a positive impact online to potentially save on insurance costs.
What: Consumers are demanding change in the insurance industry, with 48% of consumers believing the industry is lagging behind in technology and 72% still purchasing insurance offline. Insurance companies that rely on call centers and salespeople to win customers are facing increasing costs and growing customer dissatisfaction.
Why it matters: Distribution is core to insurers’ success. Many traditional sources of business are using digital platforms to scale their impact. Agency producers that use digital tools can increase traditional production by a factor of 10, and carriers that can interact through these emerging channels stand to gain the most. Setting aside direct-to-consumer models that are incrementally growing, augmentation of current sources is poised to experience explosive growth. Whether it be new marketplaces, agency management systems that are transitioning to digital experiences, or embedded apps, carriers need new tools to interact with evolving sources of distribution.
What: Pricing risk based on a single driving score is only skimming the surface of what telematics can do. Carriers that fully integrate telematics into their business operations can offer more tailored and competitive products to their customers.
Why it matters: Connecting IoT data into insurance products is a process currently in its infancy. Take auto coverage as an example – many companies are relying on simple driver scores to price risk. However, IoT data has the potential to enable pricing on a much more holistic basis, considering factors such as time of day and location. We are really just scratching the surface of what IoT data can do.
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