Loyalty is good business. Insurers who can reduce their rate of churn, through a smooth renewal process, automation and sharp pricing for example, create happy customers who buy more products, and recommend to friends and family. Higher loyalty means reduced costs and better margins.

Insurers have been making efforts to return to the traditional values of loyalty. But looking at some recent research, the habit of switching and shopping around is still rising, partly driven by rising costs and rising premiums, as well as the price comparison sites becoming more mature for home insurance.

Applying insurance digital transformation in the right places

In fact UK general insurance is ranked highest in the world for the use of digital channels by consumers. Almost 80% of insurance customers go online at least once a year, for purposes of searching products and prices.

So it is an issue which goes right to the heart of improving the insurance proposition: are insurers applying digitisation in the right parts of the process, to be able to drive loyalty and customer satisfaction, over and above just the price? Are they delivering digital services in the right places, where the consumer wants them? How to adopt a customer-centric strategy?

We recently conducted two research studies separately, looking at consumer expectations of insurance, and the view from within the industry on where analytics and digitization are being applied.

The hypothesis for the insurer study was that if data and analytics are the vital ingredient to understanding the customer, and predicting their behaviour (post-sale and pre-sale), how do insurers view analytics in solving their business challenges? And what is their view of consumer demands over the near-term and the longer-term?

Data building blocks for smart insurance of the future

Many insurers are proceeding more into the digital processes of alerting customers, redesigning the customer episodes, and helping them actually mitigate certain risks – such as a water leak, fire or burglary – rather than just paying out when incidents happen. Axa, with Connected Home and other initiatives, is on a multi-year journey to redesign how it interacts with personal lines and commercial customers. The smart home insurer Neos is working with Aviva, Zoopla, Hiscox, Munich Re and others to deliver smart cameras in the home, sensors and 24×7 assistance.

Digital initiatives are a great formula for moving the industry forward in several different dimensions: risk prevention, assistance, and customizing products to better match the needs of individual customers. All of these need data to be able to work.

The great strategic imperative for applying data analytics is that, not only does it reap direct operational efficiencies and cost benefits in the market today, it also creates the essential infrastructure, and fuels the services of tomorrow.

In our survey, almost all insurers (86%) acknowledged that digitization and automation has allowed new types of insurance to emerge. Almost nine in ten (89%) said there is a ‘somewhat strong’ or ‘very strong’ need to prepare for it.

Personal home insurers feel more confident in their state of preparation for digital, compared to motor insurers. Some 81% of home insurers said they are ‘somewhat’ or ‘very’ prepared for automation, compared to 75% of motor insurers.

Nearly all insurers see challenges in terms of data protection and security, the ease with which customers can switch using digital processes, and cyber risk. In terms of these threats, home insurers (42%) and motor insurers (51%) are most concerned about switching and how to deal with it.

Insurance providers value digitisation and are ready to go further

Perceptions around the types of data that would be most useful for better pricing, for retention and acquisition, were fairly similar between insurance lines of business. Some 64% of home insurers said the ability to price more accurately with policy history data was the most important application of digitization, compared to 58% of motor insurers.

For motor insurers, the ability to improve the customer journey with automation – largely determined by the handover from price comparison sites for most providers – was the most important focus for 66% of insurers, compared to 56% of home insurers. Motor insurers are also concerned about reducing application fraud, which was the priority for 66% of insurers, compared to 49% of home insurers.

The ability to pre-fill application forms from the consumer’s ID was considered most likely to improve the application process for 48% of home insurers and 38% of motor insurers.

This single strategy was ranked as more powerful than reducing the number of questions in the application, improving ease of use on a website, or other techniques.

Results from LexisNexis Risk Solutions Home Insurance Study

When we surveyed consumers on their preferences related to home insurance, the ability for insurers to automatically pre-fill their property or other information into the application process was considered a benefit for 96% of people: 45% said it would make the process ‘a great deal’ easier, whilst 40% said it would make it ‘somewhat’ easier and 11% said it would make it ‘a little easier’.

A large portion of policyholders perceive that their insurers are already partially automated and 39% said this has made their customer experience ‘much better’ or ‘somewhat better’. Another 35% said they believed automation had made no impact on their customer experiences.

Most of the policyholders surveyed (68%) told us they think all of their past policy history should be taken into account in pricing their insurance, and they’re happy for property information (96%) and past claims (91%) to also be brought into automated processes. Some 81% of homeowners said it would be ‘completely’ or ‘mostly’ acceptable to use their property information to price more accurately.

From these results we conclude that data analytics for pricing and for driving profitability – across diverse platforms, brokers and price comparison sites – has been the major focus for a lot of insurers, especially in the highly disintermediated motor sector. Some 70% of motor insurers said that applying data to effective, more targeted marketing was their priority, compared to 46% of home insurers.

Conversely, 57% of home insurers said that pricing policies more effectively was the priority for data and analytics, compared to 36% of motor insurers.

Other aspects that customers value, such as a smooth onboarding process, form pre-fill and new services that contribute to loyalty don’t seem to have been a high priority up to now.

For more insights from these research results download the LexisNexis Risk Solutions white paper ‘Diving Together into the Information Pool: Are Insurers Putting the Power of Contributory Databases to Good Use?’

*LexisNexis Risk Solutions carried out an anonymous survey, the UK Insurance Underwriting Digitization Study, 8 December 2016–9 January 2017. Mixed mode of data collection: online panel and telephone interviewing. The sample was 170 insurance professionals, 55 personal motor, 52 personal home and 63 commercial property. The respondent must spend 30% of their time in underwriting-related activities for a given line to be assigned to answer questions specific to that insurance line.

** LexisNexis Risk Solutions carried out an anonymous survey, the UK Home Insurance Consumer Study, 25 January–1 February 2017. The sample was 1,500 residential homeowners in the UK, who owned their current residence for two years or more, home insurance covering their primary residence, equally or solely responsible for home insurance decisions.

Follow the link to the LexisNexis Risk Solutions website to find out more about how we support insurers.