Data will enable the insurance industry to recover from crisis
The COVID-19 crisis has hit the insurance industry hard. Not only have claims risen significantly across many portfolios, bond and investment yields are also down, leaving many with substantial deficits. European Insurance Industry associations have certainly been impacted, while in the UK alone, the Association of British Insurers (ABI) expects total claims due to the crisis to reach £1.2bn from travel, business interruption and event policies. And while the total number is not yet known, fraudulent claims are also widely expected to increase, further impacting the industry.
Property & Casualty, Accident & Health and those reinsurers covering business interruption (BI) can additionally expect to see significant losses throughout the rest of the year. The crisis has such potential for losses that even Pool Re, the fund set aside to manage major terrorism claims, has come under pressure to release funds back to the industry.
It’s therefore imperative that insurers make full use of all the tools available to protect themselves now and plan for the future. Arguably the most effective way to do so is with data. Already a core component of how insurers manage their risk exposure, data and the insight gained from the analytics tools that can effectively manipulate it, have the potential to mitigate the damage that COVID-19 could have on the industry.
Effective claims management and fraud prevention
In a downturn, consumers are more likely to turn to fraudulent means out of desperation. Defrauding insurers through false claims is often seen as a victimless crime, but that’s simply not true. Not only do insurers suffer, consumers do too, as they have to pay higher premiums to refill the pool. Such activities already take place in calmer periods, but disruptive economic times make the problem much worse. It’s imperative to manage these risks effectively. Through improved fraud detection and management strategies, supplemented by analytics engines that can quickly spot anomalies in a policyholder’s activity elsewhere, insurers can take steps to protect themselves from exposure and mitigate the threat.
Modelling for a new commercial landscape
Insurers are already well versed in using data to model their exposure to risk across portfolios. Whether it’s assessing the potential for building and vehicle damage, disruption to travel or even the likelihood of loss of life, the insight generated by risk modelling teams enables underwriters to make valid and informed decisions.
However, the ‘new normal’ could have an adverse effect on these models. Usually based on first party historical data, modelling teams are going to need many more resources to help them generate the insight required. That could mean greater access to data that will map similar one in a hundred-year events, or the financial impact of travel disruption on a specific industry, so they can guide the underwriters to accurately judge the level of risk vs premium requirements. Third party data will therefore be key to unlocking the knowledge of what the future may look like, and the opportunities within.
Use data to recapture growth
Data is already a powerful tool to protect an insurance company from risk, but it can also supercharge growth and customer acquisitions opportunities too. With many countries in different versions of lockdown, online marketing has become the only way for brands to reach out to them, insurers included. And, as many consumers look to cut what they see as unnecessary costs, they are more likely to retain the services of those brands that are actively supporting them.
Analytics can be a powerful tool to reduce the impact on insurers. The UK’s Admiral has, for example, used data as a valuable tool for customer retention. Following insight that demonstrated a significant drop in the number of motor claims, it provided a rebate to all policy holders as a means to encourage consumers to stay loyal. This data-driven marketing activity created a win for both the customer and Admiral’s long-term revenue stream.
While a rebate option may not be available to all, there are other ways to protect the customer base. The growing trend towards customer convenience and round-the-clock self-service can easily be harnessed to make the process of managing their policies easy.
Experian is here to help
Visit our COVID-19 Resource and Support page for the latest white papers and other information relevant to the business resilience of you and your customers.
Analytics is going to play an important role in this recovery by providing insurers with the insight they need to protect themselves from exposure and promote their offerings, enabling them to open up new opportunities to expand their services.
If you’d like to find out how Experian can support you through this crisis, please get in touch with your Experian account manager today or contact us here. We’re on hand to help you and your customers emerge from this crisis even stronger.