Risk & Analytics

Thinking about insurance? Take a holiday!

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I recently chaired a presentation to a full room of insurers about what insurers could learn about customer analytics from the retail sector. It’s very tempting to make what seems an easy comparison between retail insurers and retailers of consumer goods. Of course the argument goes that the policyholder’s behaviour is the same for both.

But I wonder… Is it right to compare the purchase of insurance, which is a one-time annual purchase, with the purchase of food, clothing or cosmetics – all of which is done more frequently?

Maybe a more effective comparison is with the travel industry.

After all, we only take a small number of vacations each year, and our behaviour in buying holidays looks (at face value) to be quite similar to buying insurance: simple stuff like flights are bought online; the more complex tailor-made holidays are arranged through an agency, omni-channel is dominant.

Insurers shouldn’t look down on the travel industry which sustains, directly and indirectly, one in every 12 jobs in the world, and generates about half the GDP of the banking and financial services industry. The key challenges for the travel industry are the economy, capital availability, risk management, and increasing regulation. Insurers will have some sympathy for these issues.

I even wonder what the insurance version of ‘budget airlines’ might be? Maybe it’s basic cover, plus lump sum add-ons for extras. In the airline scenario, it’s extra luggage – but in auto insurance perhaps we are looking at an extra driver? And the ability to do all this on a mobile App.

Tom Davenport’s interesting white paper on this topic discusses how  both British Airways and Marriot amongst others have transformed the travelling experience, and discusses improved decision support, enhanced customer experience, personalisation, and cost reduction.  

Insurance has more in common with ‘travel’ than we might imagine, especially when we get to the ‘acid test’.  At the end of the day customers of both industries enjoy a ‘moment of truth’ – in insurance they make a claim, or in travel they finally reach their hotel. In each case, a poor experience becomes an unforgettable let down, and a broken promise.

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