Digital reinvention for insurance: Differentiating through IoT, analytics and UX

By | 4 minute read | December 10, 2019

No matter how good your customer experience is, it can always be better. Financial services organizations have invested heavily in digital experience for many years, with focus on experience design, predictive analytics and the Internet of Things (IoT). Although successful, the efforts have been mostly siloed, tactical and (at worst) no longer differentiating.

A major tenet of customer experience is to deliver ever-improving, value-added interactions based on individuals’ unique situations and needs. The next leading edge of experience differentiation will come from digital reinvention that harness synergy from multiple technologies. The first is IoT, a series of interrelated data-gathering mechanisms that digitizes real-world behaviors and provides a real-time view of every customer. The second is predictive analytics, wherein the data collected by internet-enabled devices and supplemented by other sources is digested to glean an understanding of customer behavior and provide a recipe to act proactively to satisfy their needs.

These technologies are powerful, but they don’t extract the full value from digitized information on their own. There’s a third valuable element: the human element. We can refine and enhance customer interactions by combining insights from IoT and analytics with an understanding of the needs and desires that drive customer behavior.

 Digital reinvention in action

This combination of IoT, analytics and human experience powers digital reinvention across a range of insurance services. Here are some of the innovations IBM is working on with large insurers.

Long-term care: Better serving policyholders

Take long-term care, which faces a ballooning patient base that’s plagued by complex ailments. By 2030, more than 72 million people 65 or older will be living with three to five chronic diseases or disorders. These people will need care, and the trend is toward home-based treatment.

Motion and temperature sensors can monitor real-time conditions in policyholders’ homes. Predictive analytics systems can use that data to assess the probability of falls (suddenly not moving), overeating (too many trips to the fridge), leaving on the stove top (using heat sensor), cries for help (voice recognition) and other incidents.

The human element can be integrated by sending data to caregivers and family members, keeping them up to date on the policyholder’s condition. Caretakers can use the data to formulate advice on how to improve sleep or avoid depression. The link between data-driven decision-making and human understanding of the customer’s needs is powerful.

Auto insurance: Improving retention rates

This combination of technology and human experience can also improve policyholder retention rates in the auto insurance industry, which sees a high customer churn rate in the first 90 days of new policy purchase. Preventable customer churn costs American businesses $136 billion each year.

Advanced analytics can identify policyholders at the highest risk of churn — people who had significant rate increases, have lower credit rating or live in a competitive market. By combining real-time data sources, including vehicle telematics, online activities (e.g. remove payment information) and customer services interactions (e.g. lower coverage inquiry), insurers can identify signs early on that indicate a customer might terminate coverage and deliver retention-focused experiences, such as connecting with a human representative rather than promoting digital self-service.

Homeowners’ insurance: Reducing costs of claims

Leveraging IoT can be a valuable way to help reduce the cost of home insurance claims, 98.1 percent of which come from property damage. Consider water damage, which averages over $10,000 per claim: Moisture and water flow sensors in areas at a high risk of leakage can feed a real-time predictive analytics system that can alert the homeowner of abnormal water flow — if it’s severe, the system can trigger a shutoff valve to prevent flooding, and the insurer connects the homeowner with an immediately available local plumber. More than half of water damage can be detected and prevented in time to save aggravation and money to both homeowners and insurers.

Where to begin

As these examples illustrate, the combined capabilities of IoT, predictive analytics and digital experience design offer countless ways to create differentiating value for the customer. To take advantage, the insurer must continuously and digitally reinventing itself with the customer in mind.

Begin by profiling the customer, using data as a starting point from which to create personas. First, build predictive models using internal and external data, then segment the target population based on their key traits that are important in solving the business challenge. Finally, apply human experience with personas developed based on interviewing actual customers and secondary research to understand their desires and behaviors.

Armed with this unique blend of data- and human-driven insights, insurers can reconceive solutions to business challenges by employing human-centered ideation techniques such as design thinking. This is the time for big ideas, for thinking outside the box about breakthrough solutions or first-of-its-kind use cases. Deploy your cross-disciplinary teams to encourage cross-competency idea exchange and collaboration.

After the conceptualization stage, you’ll need to figure out how to fit these ideas into the ideal end-to-end customer experience. Design these experiences targeted at high-value segments, including how real-time data from IoT can continuously and proactively improve the value proposition.

Finally, build a roadmap that supports agile development and deployment of minimum viable experiences (MVE). Pilot the MVE to test market viability and refine for large-scale deployment.

“The true sign of intelligence is not knowledge but imagination,” said Albert Einstein. Let your imagination guide the digital reinvention journey.