Design/UX

Why Insufficient Data is Costing the Insurance Industry Big Money

In today's digital insurance world, data is king. Insurers have access to more customer information than ever before. However, figuring out how to interpret and leverage this overabundance of data can be overwhelming. Having the right data strategy in place helps insurers make informed business decisions that positively impact their bottom lines.

The Customer Experience Suffers

Policyholders want insurers that are genuinely looking out for their best interests. High-quality data standards are essential for ensuring an optimal customer experience. On the other hand, inaccurate, incomplete, and false user data can have a damaging impact. Failing to meet expectations can lead to dissatisfied customers and hinder your chances for long-term growth. On average, inadequate data is responsible for $15 million in losses each year.

Example

John is a life insurance customer at Company A and has been with the company for two years. John chose the insurer because of its affordable premiums and high-quality coverage. However, when it's time for John to renew, he cancels his policy in favor of another carrier, Company B. Company A learned a hard lesson; A satisfied customer is 80% more likely to renew coverage than a dissatisfied customer.

What happened? John was dissatisfied with  mundane customer service. Although the user experience with Company A wasn't necessarily negative, it wasn't positive, either. The competition was willing to go the extra mile to provide exceptional service. Company B offered useful tips for further reducing John's rate, contacted him with relevant follow-up messages, provided a user-friendly self-service portal, and made him feel like their top priority.

The self-service portal allowed John to search for ways to get more out of his insurance policy. He came across an informative article from Company B about the benefits of switching to permanent life insurance coverage. After browsing for a short time, Company B's live chat window popped up, offering further assistance.

John was curious and asked for more details. In less than one minute, John was connected to a representative, who was already viewing his customer profile, latest search requests, and relevant social media data. The agent knew that John had recently purchased a new home after the birth of his daughter. This information enabled the agent to dive right into a personalized and contextual conversation. Company B won John over by meeting John's needs with a permanent life insurance policy.

Solution

Leveraging up-to-date customer data ensures interactions are not only personalized but also contextual. Third-party data can enhance the customer relationship by completing internal profiles that are incomplete or outdated. Additionally, segmenting customers into groups can help insurers market products according to specific life events.

Knowing which terms consumers are searching for can give you clues as to what they're looking for in their insurance policy. A self-service portal can collect this data and provide insights into which customers are undergoing fundamental life changes such as changing jobs or moving to a new neighborhood.

Exclamation Labs has experience partnering with insurance companies to develop fully integrated insurance agent portals. We build portals that allow you to work smarter with one seamless agent interface, eliminating the need to log into multiple systems.

Self-serve options should offer intuitive solutions and actionable data insights. Your portal will only be useful with the input of high-quality data. If your online experience is sub-par, it's unlikely that customers will return or continue to interact with you. It’s imperative to optimize your self-service portal for mobile devices. Customer feedback and ratings can help you understand where you need to make improvements.

Insurers Miss Out on Opportunities

On average, insurers can expect a 60 to 70% chance of selling to existing customers, compared to a 5 to 20% chance to convert a new customer. Big data is helping insurers uncover more cross-selling opportunities.

For example, social media reveals that one of your customers just had a baby. In response, you send an email to congratulate your policyholder. Additionally, you remind the customer of relevant life and health insurance products to protect their family. However, without high-quality data, insurers can't correctly identify these leads.

Example

Insurance Company C wants to begin a targeted marketing campaign to cross-sell life insurance to new homeowners. The company analyzes datasets to determine which policyholders have recently purchased a home. Finally, they launch the advertisement and send emails to individuals.

Over the next days, the company receives several responses from targets that are confused about the email. Somehow, customers who were not homeowners were receiving these targeted emails. After investigating the cause, the insurer found that they had made an embarrassing mistake.

The marketing automation and CRM system of Company C had misidentified many of the targets. As a result, the marketing campaign was ineffective and hurt the business's bottom line. Not only did they fail to target the desired segment, but other policyholders felt they were receiving generic emails.

Solution

Company C isn't alone. Many insurers struggle with data validation. Previously, insurance companies relied on call centers and face-to-face conversations to collect customer data. This information is prone to human error and could be outdated.

Considering that this information is critical for individual risk assessment and targeted marketing, the integrity of data shouldn't be overlooked. Validating data can help insurers recognize and prevent falsified sensor or location data as well as bot fraud.

By integrating customers' profiles, insurers can effectively take advantage of cross-selling opportunities. An essential step is data and email validation. This process helps insurers interpret information spread across siloed and disparate data systems. Insurers can improve the accuracy and availability of their data by implementing a digital platform designed to validate consumer records.

Risk Profiles are Inaccurate

A recent test from the GS1 US revealed that up to 50% of a company's data might be inaccurate. Engaging with customers early on in their policy lifecycle is necessary to develop accurate risk profiles. However, sparse data can significantly affect the accuracy of the risk evaluation and negatively impact your bottom line.

Example

Company D is calculating its loss distribution for Life insurance customers. However, the team failed to check the accuracy and completeness of the numbers given to them by the finance department. Due to a simple error, the average of policyholders was five years off.

As a result, the insurer underestimated the average lifespan of its policyholders. The premiums were too low, resulting in long-term losses for the company. Similarly, products would have been overpriced in the event of an overestimation, and the company would be at a competitive disadvantage.

Other mistakes in gender or premium end-dates, for example, can also have a significant impact on an insurer's bottom line. Many times, a simple mistake can offset other variables, resulting in more severe financial consequences.

Solution

Claims management systems need to be seamlessly integrated with data technology software to ensure accurate risk profiling. Additionally, the information should come from multiple, verifiable sources that are updated throughout the policyholder's lifetime.

Insurers should regularly clean their CRM data to ensure accuracy. The easiest way to organize customer information is with data enrichment technology. This AI-powered technology can track data changes and notify admins when inconsistencies are found.

Always establish defined data entry standards to minimize human mistakes. This process provides clear definitions for user workflows. CRM automation software can reduce the amount of data agents need to input manually, further eliminating inaccuracies.

Final Thoughts

Effectively leveraging data isn't always easy. However, insurers that interpret data strategically  establish the appropriate metrics, and perform digital optimization, have the best chances of making informed business decisions. However, weak data can leave insurers susceptible to exposures that not only result in economic loss, but can also damage reputations.

Work with a technology partner who specializes in the insurance industry, and has over 20 years of experience. To learn more about High-Quality Data, contact the experts Exclamation Labs at (888) 545-5008. Our team will be happy to answer any questions you have.
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