Data Quality is Essential to Sustainable Underwriting
By Joanne Butler, Head of Product Marketing and Pre Sales, Charles Taylor InsureTech for Insurance Day, first published on 4 January 2022: Data quality is essential to sustainable underwriting
Many of the problems insurers face in getting closer to customers and gaining better insight into the risks they face can be traced back to data that is incomplete, out of date or wrong.
Insurers are some of the biggest processors of customer data in the world, yet they are still finding it challenging to leverage insightful client data. In a world in which customers expect more from their insurance and customer-centricity is an increasingly crucial differentiator, they can and want to do better.
While innovation and uptake of digital solutions during the pandemic helped insurers get a little closer to their customers, carriers must continue to harness data better to fully understand their customers’ needs, tailor appropriate solutions and improve their own financial performance.
This starts with accessing the data they already have right at the start of the customer journey. If a potential customer has bought a policy from an insurer in the past, why should they have to fill in a dozen fields of information the insurer already holds somewhere in its organisation?
Any data that already exists on the customer should also be enriched with third-party and publicly available datasets to help build a holistic picture of them as a risk before a quote is even presented.
Data privacy regulations make it impossible for insurers to access certain types of personal data. However, a property insurer, for example, should be able to access a potential insured’s basic personal information and the key risk attributes of their property, such as its elevation, proximity to hazards, age and construction materials, and simply ask them whether anything has changed.
Accessing this data at the quote stage simplifies and improves the customer experience. It also enables the underwriter to target customers with more appropriate products and coverage, driving up conversion rates. Personal lines buyers are price-sensitive and often do not fully understand the coverage until it is too late. Customer-centricity is about delivering true value by giving the customer the cover they actually need, at a price that is right rather than simply the lowest.
Customer-centricity is about delivering true value by giving the customer the cover they actually need, at a price that is right rather than simply the lowest
Value-added extras designed to incentivise and engage customers also present another opportunity to learn. By giving life or health policyholders wearable physical health monitors or telematic black boxes to drivers, for example, insurers generate valuable data that helps mitigate losses and improve behaviours.
We are also seeing this in commercial lines like marine and commercial property, where connected devices feed information back to underwriters allowing them to track assets, mitigate losses and adjust premiums in near real-time. As the internet of things expands, real-time data feeds will allow insurers to be more agile, responsive, and customer-centric across an array of classes.
Barriers to success
Understanding customers in the ways described above is only possible with the help of technology. Artificial intelligence (AI), for example, assimilates vast volumes of data from multiple sources, including unstructured data, in a way no human team could replicate. It recognises trends and generates insights to inform decision-making while also allowing many processes to be automated. However, legacy technology is preventing many insurers from harnessing the power these tools.
For those investing in digitisation, migrating sometimes decades-worth of data to upgraded systems is a challenge in itself, prompting Charles Taylor to create a team dedicated to data migration projects. But even if a company successfully overhauls its systems, migrates its data and employs the latest AI, machine learning and analytics, inefficiency in the way data is transmitted is another challenge holding them back from the customer – particularly in the commercial market.
The longer the intermediation chain, the harder it is for the insurer to properly understand their customers ’characteristics and needs. Thankfully, the days of conducting business through emails and bordereaux spreadsheets containing weeks of out-of- date information are numbered as the industry is striving to find ways to transfer data more efficiently than it does today.
APIs and digital ecosystems like Delegated Data Manager are bringing the specialty market together – and insurers closer to their customers – by allowing data to flow seamlessly between counterparties in real-time while enabling insurers and brokers to access best-in-breed solutions that give them better visibility and more efficient management of their data.
The next step, however, is data standardisation, which will remove many of the pain points in today’s digital marketplace by ensuring insurers, brokers and their APIs speak the same digital language. Organisations including Acord and Lloyd’s are developing data standards as we speak, although, to date, it has proven difficult to design and deliver a universal standard that is widely adopted – and little surprise, given every risk placed in London requires more than 500 fields of information to be submitted.
If data standardisation is achieved, it will not only enable the smoother, faster transfer of data but also significantly improve the quality and consistency of data flowing through the value chain. This is critical to getting the most out of AI and machine learning, which need to be fed high-quality data over a long period of time to learn and perform.
In fact, many of the problems insurers face in getting closer to their customers can be traced back to bad data– data that is missing, out of date or simply wrong. If we fix the data, everything else becomes infinitely easier and genuine customer-centricity will be within our reach.