A new era in the insurance industry: FinTech and Big Data are true game changers
The major trends affecting the insurance industry are directly related to emerging technologies. According to a Capgemini report, the Internet of Things, Big Data and the growing role of FinTech companies were the most important factors shaping the insurance business in 2016. The importance of the online channel in the insurance business is also increasing on a continuous basis.
Internet of Things – our data everywhere
The value of the Internet of Things market is expected to reach USD 1.7 billion by 2020. As many as 29.5 billion internet-connected devices are forecast to be in use by that time as well. The global population, meanwhile, will reach 7.7 billion people. So, there will be 3 or 4 connected devices per each human being. Two such technologies are of particular significance from the insurers’ point of view: intelligent vehicles and smart houses.
The former, also known as “connected cars”, are technologically advanced, internet-connected vehicles relying on sensors to collect data that is processed and used to inform the driver about the need to change engine oil, or about the location of the nearest gas station when the car is running out of fuel. Sensors also gather data on the driving style and on the wear and tear of individual components. This type of information is of key importance for insurers.
According to the „European Motor Insurance Markets” report total motor insurance operating expenses are constantly growing from 18,5 billion euro in 2005 to 21,3 billion euro in 2013. It makes no surprise, that insurance companies are looking for innovative ways to optimize the costs. That's where telemetric data from smart vehicles come in handy, as it enables insurance companies to have real time control over drivers behavior. In other terms – safe driving may be promoted by lowering the cost of insurance and road rage may end with higher fee for insurance company.
The trend concerning smart houses is equally interesting. Devices such as thermostats that enable the user to control temperature with the use of a smartphone are becoming cheaper and more accessible. According to a report by SAP, the “connected home” market is expected to be worth USD 490 billion by 2019. As far as the insurance sector is concerned, this means that the technical condition of the building may be traced in a simple manner, and that information may be assessed on an on-going basis, in order to prevent potential failures. Data from such devices as smoke or carbon dioxide detectors will contribute to more efficient claim adjustment, and - most importantly - will prevent losses.
New business models
The growing amount of data generated by the insured is just one of the factors - the growing importance of the online channel in the insurance sales process is the other. As many as 79 per cent of customers use the internet to communicate with their insurance supplier, and this number may grow by 10 per cent over the next five years. The number of clients ordering insurance over the internet will increase by 25 per cent, those renewing their coverage - by 27 per cent, and those using this channel to report a claim - by as much as 37 per cent.
This process is closely linked to the growing popularity of FinTech companies that offer surprising, non-standard business models to encourage customers to change their insurance-related behaviors. The Metromile start up offers vehicle insurance rates that are directly linked to the distance covered. Unlike the majority of insurers, the company believes that paying high third party liability premiums for an old car that spends most of its time parked, makes no sense at all.
Meteoprotect, in turn, has specialized in selling insurance against damage caused by inclement weather. The startup offers very precise weather forecasts and differentiates rates for individual customers based thereon.
Friendsurance is another of the startups that challenge the traditional insurance model, as instead of lowering the premiums, it decided to offer its customers a bonus if they manage to avoid any accidents during the whole year.
Reaching the customers with a more personalized and tailor-made offer seems to be the only reasonable solution for traditional insurers faced with such a challenge. Polish insurance companies are already entering into cooperation with various startups. The agreement between Benefia and the Yanosik speed camera warning app may serve as a good example here. Safe drivers will be offered a discount when purchasing vehicle insurance.
"We have come to a point at which analytical tools provide us with a whole array of new opportunities. The industry has to ask itself a critical question today: how to make use of those opportunities and how to translate the technological advantage into a market advantage. It may turn out very soon that only those will survive on the market who have taken the effort and identified the right answers”.
Wawrzyniec Hyska
Director for Financial Sector
e-point SA
The omnichannel challenge
Customers expect omnichannel and real-time service: they want their questions answered within five minutes of contacting the company. It is obvious to them that if they report a loss with the use of one channel, they may continue the conversation or refer to the information given while relying on a different channel. The Capgemini report indicates that skillful use of Big Data allows the insurers to identify key claim reports much quicker than in the case of standard procedures. Claim reports may be rapidly pre-selected based on their complexity and on the availability of specific consultants, which makes the entire customer service process more efficient. Such an approach affects the quality of service as well. However, this potential is rarely taken advantage of.
SAP data indicates that only 12 per cent of insurance companies are capable of offering a truly coherent experience, meaning that when their customers call the helpdesk asking if a query sent by email has reached the company, they will be offered a quick, positive answer. That is why 87 per cent of consumers are of the opinion that all insurers need to work hard on this specific area.
An average marketing specialist, including those working for financial and insurance companies, uses 15 different tools to manage data divided into 11 separate silos, such as social media, e-mail, contact center of information from website analytics systems. This means, in practice, that problems are encountered at different interface points. This results in difficulties with exchanging information: different service quality is offered by mobile, desktop and contact center channels.
SAP Hybris is a tool that enables companies to combine and structure all the aforementioned channels, and to manage them effectively.
The big guns have grasped it
The SAP Hybris tool is relied upon, inter alia, by the international giant - Aviva, employing 27,700 staff all over the world. In order to maintain its turnover of USD 2.5 billion in such innovation-hungry times, the company is using predictive analytics: it analyzes data in real time in order to tailor the offers sent to the needs of specific addressees. Thanks to personalized communication and the data gathered, Aviva can react to or even predict its customers’ needs. This, in turn, boosts loyalty and translates into higher earnings.
SAP Hybris Marketing implementation for the insurance industry may involve a complete platform enhancing customer relations, or a single point solution taking care of the most acute problems. However, in order for the implementation to be based on a comprehensive strategy, and to be efficient, cooperation with the right business partner is required. A partner that not only is competent as far as the technology used is concerned, but is also experienced in implementing SAP solutions and has a thorough understanding of the financial sector. A partner like e-point – an SAP Hybris silver partner that has been operating on the Polish financial market for 18 years now.