Being an insurer in the current climate is tough. There’s continuous pressure to win new profitable business, drive down costs, provide great customer service and keep one step ahead of the competition.
It’s the same for brokers. Their challenge is to acquire and then retain new business by forging strong relationships with consumers who are extremely price sensitive and now conditioned to shop around, causing greater churn and increasing the cost of doing business.
To achieve all of these goals, insurers and brokers need to be intelligent, sophisticated and, above all, responsive.
Speed and agility are key to improving insurers' business performance. To lead in this tough, competitive market, insurers must be able to quickly bring innovative products to market, dynamically manage rate performance and distribute them efficiently. This agility and responsiveness to market shifts also benefits brokers, as it makes it easier for them to attract and retain customers.
A crucial part of the ability to rate and price accurately as well as consistently across all lines of business is increasingly higher levels of data integration. If an insurer's rating and pricing engines are the brains behind the business, then augmenting risk details with data from other sources increases the insurer's intelligence, promoting better business performance.
Although enhanced data integration is relatively new to the insurance industry, other sectors have been using these techniques for a long time. One great example of this is the retailer Tesco, the UK's biggest food retailer. It is also the largest UK pet insurer and has a very successful online business channel.
Tesco introduced its Clubcard scheme over 20 years ago, enabling it to successfully use the data gathered at the point of sale to develop a detailed single view of their customers. Incorporating this data with other external information provides a level of insight that can be used to shape promotions and pricing policy.
The same is true for insurers, with more data providing the opportunity for greater levels of intelligence. However, making sense of the data and transforming it into true customer insight is a totally different matter. While a lot of insurers think they have this capacity, some lack the experience to make the most of their data sources in the same way that the retail sector has. Many also lack the technology to make this level of insight available in real-time at the point of application.
By drilling into what the data is telling them and bringing it all together, insurers are able to get a very detailed single view of their customers, which can, of course, also be used by brokers. This insight can drive up customer engagement levels, as well as support the ability to make the most of any opportunities to cross-sell and upsell.
Such sophisticated data processing capability can also be used to tackle application fraud head on. With a single customer view, insurers and brokers can identify both the person and the device, then blend this with the observed behavioural characteristics to form a very powerful weapon in the fight against application fraud.
This is the premise behind SSP Verify, our application fraud solution that blends the different levels of data intelligence derived from an unrivalled view of the UK insurance market to provide sophisticated insight into application fraud.
The findings may prove to be both surprising and worrying for insurers. One recent customer was shown to have changed many material aspects of their risk details during the course of 77 quotations. The customer halved their premium through this manipulation before taking up the policy with an unsuspecting insurer. Examples like this, using real data, highlight the problem the industry currently faces.
It’s a similar story from a broker perspective, of course. As customers who lie are 40% more likely to make a claim, brokers are jeopardising their agency loss ratio performance by unwittingly placing these customers on cover. In addition, a number of brokers are being specifically targeted by customers who are repeatedly obtaining cover with the cost spread through credit schemes, only to then default on all payments. These customers have worked out that they can simply repeat the process once the brokers’ internal cancellation processes have caught up with them.
Changing and distributing rates is a challenge in the current environment. It can take a long time to change rates and even longer to distribute them. Insurers need to send the same information to different software houses, and as well as hindering responsiveness to a changing market, the high level of effort this requires drives up costs.
Moreover, insurers tend to have multiple rating engines, none of which provides a view across the whole market. This makes it near impossible to offer a consistent price to customers shopping through the various channels, never mind achieve something as sophisticated as a real-time single view of the customer.
As a result the current processes are slow and costly, opportunities to win new business are missed, innovation is hindered by the lack of agility and, perhaps most importantly, the absence of wide-coverage sophisticated customer identification techniques erodes customer value, as well as allowing high levels of application fraud to persist almost unchecked.
When it comes to rating and pricing, insurers should ideally have a single solution, such as SSP Intelligent Quotes Hub, that provides whole of market visibility and customer transparency, as well as enabling insurers to self-service changes to the rates, prices and other business rules. Similar levels of self-service capability are also provided to brokers, such as those operating delegated authority schemes.
Such a solution puts insurers back in control and enables them to respond with greater agility to changes in the marketplace. With the time-intensive process of sending data to software houses removed, self-service increases speed, drives up efficiency and acts as a catalyst to promote innovation and win new profitable business.
As far as dealing with one of the industry's major challenges, fraud, is concerned, SSP has a solution for this too. SSP Verify, powered by sophisticated real-time single customer view capabilities, sits right at the core of the SSP Intelligent Quotes Hub and provides a very effect line of pre-inception defence for insurer and brokers alike.
But it doesn’t stop there – the single customer view achieved by SSP Intelligent Quotes Hub can be used in many different ways to improve the customer journey and optimise value. For example, it is possible to identify an existing customer who’s shopping around armed with a renewal premium or to apply sophisticated “next best action” rules to optimise cross-sales.
Adopting an advanced, agile and flexible core rating, pricing and customer insight environment will provide insurers and brokers with the greater speed, intelligence and sophistication necessary for them to stay one step ahead of the competition – and SSP is well placed to help them realise their aspirations.
Originally posted June 2015
About the author
Paul is responsible for driving innovation through SSP’s strategic e-trading and distribution solutions across the personal and commercial lines sectors in the UK and internationally. Prior to joining SSP in 2013, Paul spent 15 years as part of the executive team of a national high street insurance broker, heading up a large IT function, and was responsible for shaping and successfully leading technology-enabled transformational programmes.More content by Paul Cassidy