What do companies like Nike, Vodafone or Amazon have in common? All three rely on data-driven product development and services that are optimally tailored to consumers – from product recommendations through communication content to customizable products. In the new Nike flagship store in New York, customers are not only able to design their sneakers on the spot, but also can book consultations with athletes who help them achieve their fitness goals. The offer in the store is based on the most in-demand articles in the region, compiled from data from the online shop. "One size fits all" is in the past.
Life phases are a thing of the past
Today's consumers no longer want to commit in the long term. This wish is met by more and more sectors with flexible contract models. The services of streaming portals can be activated and canceled with one month's notice. Rental commerce is booming as well: if you need a washing machine in your vacation home, you can rent it for a few weeks, along with a TV.
To reach consumers today, product offers must be flexible and aligned to the customer's life situation. The traditional life phase model is history.
Data-driven product management in the insurance industry
The insurance industry can and needs to join these globally prevalent trends. Product management in companies will need to be guided by consumers' needs and wishes even more than before. Today, the insureds expect an insurance company to be more than just a guardian of money and claims adjuster.
The efforts to meet these changed expectations are noticeable in the sector. But in the areas of life and health insurance, it is not so simple, even from the actuarial perspective. The situation with casualty and property insurance is better. In the area of property, accident, liability, and auto insurance, components have been available for a few years now, which consumers can use to customize their service.
The global mega trends of networking and digitalization will continue to furnish huge quantities of data, which can be used to develop new products. These offers are as individual as the insureds themselves.
Insurance covering the risk of accidents and losses while playing Pokemon Go? Why not? Barmenia Versicherungen has already tried this. Everything needed for it can be easily plotted in a block diagram. A smartphone app registers that the insured is playing at the moment. The data only needs to be sent to the insurance company. Data collection and transmission can be done through a cooperation with tech start-ups. The last step is always much harder. How does the data flow in the often less modern IT of the insurance company?
The problem of interfaces, which very often stays unsolved, limits data-driven product management and data-driven rates. In this, insurance companies limit their own possibilities. This applies to the telematics rates in auto insurance, which are often talked about now.
The question that needs solving is how the voluminous data and information, increasingly collected and sent by smart devices, could be processed in companies in a useful and standardized way, for example, to implement different rate categories for the smart home.
Customized offers make comparisons difficult
Insurance companies will encounter the interface problem when designing individual offers as well. The more customized the risks covered by a rate, the harder it is to compare different products from the customer's perspective. Even out consideration for consumer protection, the risks insured by a specific rate must be described in detail. To get back to the example of a telematics rate in auto insurance, there needs to be a clear description of what the insurer understands by "risky driving."
For customers, the individual components of their insurance will probably become less transparent in the future. The trend of using comparison portals, already seen today, will likely grow even stronger as a result of individual rates, leading to even more information that will have to be provided.
At the latest when a global player like Amazon starts working more intensely on the topic of insurance, it will define how data has to be provided to be considered to begin with.
AI systems will provide support to customers and insurers
Systems that use pattern recognition or machine learning, and are currently popular under the collective term "artificial intelligence," will help comparison portals and fintech companies to compare the different rates. Personal assistants or special apps will put together the exact services and components that are optimal for the customer in their current life situation based on the combinations of insured risks and limitations. A situation that can even last just a few days.
The big question is whether the insurance industry is ready for the use of AI or which concrete measures it is taking to seize the future opportunities.
However, companies will also need AI to analyze the rates of employees and put together their own competitive products.
Lastly, without the support from AI it will hardly be possible to determine the individual risks of a person from the unimaginably large data volumes from sensors in apartments and homes, fitness devices, smartwatches or vehicles, and to draw conclusions from all of the insureds for the company's planning and thus for its product management.
Would you like to learn more about AI in insurance? Read our study on "The Future of Casualty and Property Insurance“.