We took out our crystal ball again to look at major trends for insurance technology in Canada for the coming year, and we found a collection of changes along with a disruptive technology or two. We look forward to your views.
Megatrend – Purposive Analytics
As with 2012, we found a theme which seems be an umbrella over the others. It is similar to the megatrend we identified for 2012, with a twist. We’ll let David Bidmead, CEO of Marsh U.S. introduce our 2013 megatrend. When asked by PropertyCasualty360.com about opportunities and challenges for 2013, Bidmead said, “The first opportunity for 2013 I would say lies in analytics. There is a consistent request from our clients to help them make more informed decisions about the structure and cost of their insurance programs.”
For 2012, we projected that insurers (and some brokers) would be turning to analytics generally to obtain a better understanding of their business. In 2013, we see highly focused use of analytics to support specific strategic and operational objectives.
Analytics and Customer Engagement
The term ‘engagement’ needs to be quantified to be useful. In a 2007 interview Richard Sedley, Director of Design at Seren, defined engagement as “Repeated interactions that strengthen the emotional, psychological or physical investment a customer has in a brand”.
For 2013, we see insurers implementing sophisticated anlaytic tools to track engagement programs against performance indicators, including leads, conversions, revenue, profitability, etc.. These monitoring systems will have to integrate with Customer Relationship Management (CRM) systems as well as with the policy, billing, and claims systems in order to measure the impact of engagement, and to allow the development of predictive algorithms to support up-selling and cross-selling (along the lines of Amazon.com).
This has several implications for insurers. First, this level of integration will be challenging enough for organizations which have completed modernization of internal core systems. It will be nigh unto impossible for those which have not. One solution for latecomers to the modernization party may be to look at outsourcers and/or data aggregators to take over the legacy systems and to create integration patches to analytic engines.
Second, for independent broker companies, operationalizing the use of customer data could become be the source of channel conflict. However, we expect that this will be resolved by insurers who will develop creative partnerships, including, possibly, extending the use of their own internal CRM and predictive analytic systems to the brokers. Could this be the next generation of Broker Connectivity?
Finally, customers will expect to be able to use social media as a communications channel. As an added bonus, number of analytic tools are geared towards handling social media. Any debate about supporting major social media as a communication channel will end.
Operational Analytics Turns Business Intelligence Into Intelligent Business
The implementation of data warehouses has assisted executives and managers use analytics with dashboards, etc. This functionality needs to be driven to the operational level.
Insurers are coming forward with more sophisticated offerings and options in order to compete. To market and service these products effectively and efficiently, the front line workers (underwriters, marketing reps) will require anlaytic tools and automated support at the same level of the managers, but with a different, customer service, focus. Let’s call this ‘Intelligent Business’.
Analytics in Action: The Telematics Landscape Takes Form
Although there are only two Canadian insurers with telematics based automobile insurance program at present, most practitioners and vendors with whom we have spoken agree that there are a number of large- and mid-sized insurers who are well into the planning process. There are already ‘proxy’ implementations (e.g., insurer mobile apps which track driver behaviour to recommend improved driving habits).
Telematics is a complex implementation, primarily because of the need for 1) experiential data, and 2) modifications to underwriting systems. We don’t expect to see a tidal wave of product launches in 2013, but we do expect to see some, and official plans for others. These will help us understand how Canadian providers will define the Telematics insurance landscape. It may also reveal how insurers plan to tackle other Usage-Based Insurance programs.
Technology Disrupts Insurance
This is the ‘man bites dog’ trend. Our normal focus is either how the needs of insurance impact internal technology or how internal technology empowers insurance practice. There is a trend for non-insurance organizations to utilize technology to either stray into the insurance world or obviate some of the requirement for insurance.
For example, we blogged last year on Google’s entree into the insurance quoting world. Also, 2012 saw the licensing of a ‘driverless car’, developed by Google, in several US states. One of our colleagues in the Insurance 2023 Group – Catherine Kargas – has done some work on this and suggests that as such vehicles are introduced, the need for insurance will likely decrease (accident reduction rates in excess of 90%). In addition, Catherine believes that with respect to liability, the car manufacturers may be interested in retaining the risk rather than using insurance programs.
Where to from Here
We think we have been in a transitional mode for sometime, with some organizations being able to maintain a business as usual stance. We think this will change dramatically in 2013, driven by consumer demand. We hope to share information about these trends, their driving forces, and currently developed solutions in The Chronicle, Insurance-Canada.ca Newsletter, in this Blog, and at the 2013 Insurance-Canada.ca Technology Conference.
We always welcome your comments here. And with you the best for 2013.