In a highly competitive market driven by challenging economic conditions, insurance companies must more effectively analyse data. This, says Kelly Preston, data analytics manager at SilverBridge, is critical if they are to improve the customer value proposition.
“A consequence of this competitiveness is what is termed the underwriting cycle. When business is profitable, more insurers enter the market and premium rates reduce as they compete for market share. Eventually, premiums become too low to be profitable and insurers leave the market or reduce their involvement in various classes of business.”
It is therefore important for an insurer to determine its position in the cycle. Not only will this enable the decision-makers to identify turning points but also adapt corporate strategies accordingly.
“A short-term solution would be for the insurer to focus on its profit centre to cross-subsidise its losses in other areas. But to accomplish this, the organisation needs to have a holistic view of its business. There is simply no substitute for having good information and being able to leverage off that for sound analysis,” she says.
As part of this analysis, the distribution channel of an insurer plays a significant contributing role to the success (or failure) of a product. If the product or service is to reach the correct customer segment, the insurer must understand how the two components (product and channel) interact.
“Having access to this information will reduce obscurity and allow for corrective actions to be taken. By having sight of this in as real-time a way as possible, the insurer can determine which products are successful and which ones need to be removed.”
As with any industry, insurers are constantly competing with one another to launch innovative products that meet the needs to the increasingly segmented and complex demands of customers. With such a broad selection of products available, it becomes even more important to identify the ones that are profitable and relevant.
“If the South African market has shown us anything then it is that customers respond to improved service. By streamlining administration, the issuing of policies, and reducing the time spent on a claims process, the insurer will be able to get more satisfied customers. In a data-driven environment, all of this can be monitored by embedding management processes into operations,” she says.
Additionally, measures such as service level agreements (which can be measured against targets) will also enable the insurer to become adaptive enough to respond to change.
“It is clear that there needs to be a focus on improved data management in insurance. Those organisations unable to leverage their data assets will be at a significant disadvantage to competitors who will have greater insight into customers, products, performance, and underwriting risks,” she says.