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Today, with the help of sensors, drones and mobile devices, we are are generating unprecedented amounts of data that create both opportunities and pitfalls for the insurance industry. As data continues to become more ubiquitous and grow exponentially, insurers must establish a sustained capability to effectively use this data to remain competitive. Whilst companies have been accumulating data for years, they are now challenged with managing such historical data with “data in motion,” much of which loses relevance in nanoseconds after they are created. This is particularly relevant for the insurance industry where the sheer volume and nature of data is shifting the industry paradigm in three ways:
- In a data-rich environment, a segment of the insurance business will shift from pricing and managing the risk of loss to pricing and managing the risk of prevention, including monitoring and preventative services that will define competitive parity.
- Customers will expect insurers to serve as trusted risk advisors who are able to help them manage and prevent known risks, with risk products for more unpredictable risks.
- Digital connectivity creates new customer segments and risk pools – these offer new revenue streams for insurers, but require them to effectively curate and analyze new data sets to identify and capture these business opportunities.
While artificial intelligence and cognitive technologies can help companies make sense of this data surge and differentiate to win in this hyper-competitive marketplace, most insurers do not have a sustainable model to capture, curate, organize and analyze data to find and scale insights on demand.
The challenge, and organizing, for competitive advantage
Beyond the sheer, ever-growing volume of data that insurers now have available, the nature of this data also has changed. Traditionally, insurers have accumulated data at an amazing pace over the years. This is “owned” data within the insurer’s four walls and has traditionally been the primary source of decision making. However, data has now evolved to include external sources – news reports, social data, location-based information, images, along with IoT and telematics data now are being captured. This drives a fundamental paradigm shift about how we think about data in an industry that has prided itself in owning and storing large data sets – in a world where data tends to lose relevance in nanoseconds after it is created, how do we build capability to capture and access a combination of relevant data at the point of decision making?
Competitive advantage in the insurance industry today is defined by an insurer’s ability to leverage all this data – structured, unstructured, owned, bought, rented, accessed on demand – and drive insights at scale to proactively find new customer segments, gain early insights into customer needs, and quickly innovate products that blend traditional risk products with insightful risk advice and preventive services. As insurers are considering AI and cognitive technologies to establish competitive parity, most are challenged with the problem of organizing and managing the underlying data – how to acquire, curate, store, manage and control access.
IBM Cloud Private for Data (ICP for Data) is a modern data platform that is designed to connect all data across an enterprise seamlessly, starting with enterprise data, and extending to all relevant data whether it is on premises, from devices, or on private or public clouds. ICP for data includes an enterprise metadata catalog as the centerpiece along with services for data federation/virtualization, data warehousing, data integration, data science/machine learning and embedded dashboarding. This effectively offers insurers the ability to effectively SQL the world, and serves as a platform to sustainably organize data to uncover insights at scale using AI and cognitive technologies like IBM Watson. Cognitive tools like IBM Watson do not replace human intelligence, but instead help augment, amplify and extend human knowledge. This technology is helping insurance companies translate these newly discovered data sets into cognitive-based decisions, which translates to a hyper personalized service and offering to insurance clients and customers.
Changing the industry, one client at a time
In order to be relevant for our clients, IBM continues to invest in partner ecosystems, technologies and solutions to help clients accelerate their own transformation and build capabilities for competitive advantage. Some real world examples:
- Virtual auto insurance agent helping customers
A major American insurer was looking to create a virtual agent to interact with their clients to assist them in purchasing automobile insurance, and to guide them through account updates and the claims process. They teamed with IBM to create a digital virtual assistant that harnesses both IBM Watson and big data, drawing information from multiple sources, both internal and external. After only 8 weeks, a prototype was created that provided answers to customer questions. The end result was increased accuracy of customer service, faster, and it provided the insurer’s human customer service agents with more meaningful, unique client experiences by eliminating repetitive and mundane tasks. Overall, customer conversion rate for customers using this channel to buy insurance has improved by over 60%.
- IoT and telematics data in Germany expedites emergency response services
IBM collaborated with the German Insurance Association and a multinational engineering and electronics company to develop and deploy IoT sensor devices to cars insured by insurers who were members of the German Insurance Association to help provide proactive emergency response services that may reduce human deaths in vehicular accidents. When the device senses any impact to the car, a message is sent to the IBM monitoring center, which locates the car and initiates a service that proactively sends an emergency response unit to the car to accelerate medical and rescue services.
- Italian insurance fraud prevention through AI
An Italian auto insurer found that its manual, labor-intensive fraud-review process became increasingly cumbersome, limiting the company’s ability to investigate suspicious filings among false positives, reducing its overall efficiency in settling legitimate claims in a timely manner, and ultimately, increasing overall operating and claims costs. They worked with IBM in implementing a cognitive-based, automated fraud processing and identification solution that uses analytical algorithms to better identify and triage suspicious claims that demand attention.
- Text to speech for competitive advantage in Japan
A Japanese insurer enlisted IBM to analyze the text communications with their customer communications – good and bad – and turned that into a competitive advantage. The insurer was looking to decode more than a million customer interactions that took place in a year’s time frame and turn it into actionable intelligence to provide a higher level of service. Using advanced text analytics powered by IBM Watson, customer sentiment was extracted from these messages that helped decision makers make informed, proactive improvements to their customer service system to ultimately provide an industry-leading level of customer service that made this insurer stand out from their competition.
- IBM-powered cyber insurance
The exponential growth in digital connectivity continues to increase cyber threats and the risk of enterprise data breach. While every cyber and data breach entails the cost of remediation, the cost of reputation risk is much larger. This is an emerging risk profit pool for insurers. However, insurers are reluctant to write large cyber risk business since they are not able to price this risk effectively due to lack of historical risk data. IBM is working with insurers to establish cyber risk solutions to assess, monitor and prevent known cyber risks by leveraging its significant investment in industrial strength security software and services. Effectively, insurers bundle IBM cyber security solutions as a part of their cyber insurance policies to proactively understand, monitor and mitigate known cyber risks.
As data, this new natural resource, continues to transform the world we live in, insurers must invest in organizing and using data as a strategic differentiator to retain competitive parity within the eco-systems that are fast developing around them.
Learn more about how IBM Insurance can help you, your business and your clients achieve data transformation.