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4 Ways Big Data Can Impact Your Bottom Line in a Big Way

Posted on August 30, 2016 by Guy Weismantel in Digital Insurer

Analytics dashboard

A study from PwC found 78% of insurers stated “changes in customer demands are a major driver of their technology investments.”

Almost all of your peers are investing in technology because the data is telling them they need to move away from product-centric tactics and develop a more customer-centric approach; putting the needs of the consumer at the heart of their growth strategy.

Harvard Business Review tweet

While there are times it can be beneficial to be a contrarian, this is not the time to reject the opinion of the industry. Even if you wanted to make an argument that looked outside of the study mentioned above, we’re still seeing these changes in customer demands across every industry, not just in insurance.

Related: 5 Industry-Leading Companies That Didn't Evolve Fast Enough to Survive

The move to a customer-centric strategy enables the business to deliver maximum value while also collecting data on the attributes of the business customers find most valuable about the business.

In other words, a feedback loop between the business and its most important customer, the consumer, is created. It’s important to note this is not always a linear conversation (you ask the customer what they want and they tell you), rather, it's a convoluted conversation happening only through the analysis of data.

Say you find 90% of customers who do X also do Y, then what if we sold a product that solved for both X and Y at a reduced rate? This is how deeper understanding and actionable answers happen.

This is going to require a mental shift for carriers who work with fragmented operations and legacy systems. It’s also going to require a paradigm shift from agencies who’ve lacked focus on technology as a core competitive advantage.

But all of this starts, and ends, with one thing: Insight.

Big data analytics provide us with the capability to view into the world of the consumer.

We can now see things like who they are, how they like to purchase insurance, and what they expect from their insurance providers.

The amount of data our industry collects is staggering. Having the right tools to turn data into actionable insights is the next step.

Let’s look at 4 of the ways big data can impact your bottom line:

The Yellow Brick Road of Customer Insight 

Carriers are increasing their ability to sell, convert, and retain customers by building “insight-based” relationships using big data analytics to leverage demographic and psychographic information.

In the pursuit of a more customer-centric model, PwC highlights 3 key areas of focus:

1. Customer insight

2. Customer experience

3. Customer-centric operating model

insurance agency vertafore big data analytics

This is a great way to think about your business, but please make sure that you are starting at the beginning with customer insight derived from data analytics. At the very least, you’re going to have a difficult time changing your operating-model before you’ve taken the time to understand your customers.

Figure 2 below from PwC’s study is a brilliant example of how you can begin to think about segmenting customers in order to determine what kind of personalized experience they’d even enjoy.

insurance industry big data analytics vertafore

Once you’ve used data to build a business case for personalized customer experience, only then can you start to address the larger organization tweaks you’ll need to make in order to stay ahead of your competition. 

Business Decisions That Make Themselves

Wouldn't it be great to take the guessing out of your decision making process?  

For many organizations, this is the Holy Grail. In one study, more than 70% of insurers said that big data analytics have already changed the way they make decisions. Ninety percent of companies across business sectors reported that big data analytics were key to driving overall strategy and improving operational outcomes.

In the last few weeks, we've dove into how Progressive uses big data to save money on ad buys; how MetLife utilizes the MongoDB Database system to get a clearer picture of their customers. We've even talked about how  big data has the ability to help prevent fraud in the insurance industry, and lastly, we talked about big data’s ability to help the industry determine how it should price products.

For a more in-depth look at how you can put big data analytics to work for your business, check out our e-book on big data analytics created to help organizations of any size.

Understand Where to Invest Resources

Many insurance-related businesses are aware 10% of their book contributes more than 50% of expected profit. Big data analytics make it possible for you to identify, compete for, and win that best 10% of your market.

Take a look at this example from Valen Analytics 2016 study showing Benefit/Vulnerability of using (or not using) predictive analytics in discretionary pricing:

big data analytics case study vertafore

The writing really is on the wall. As a professional, you know that you have to spend money to make money so choose carefully when carving up those budgets and take an extra hard look at how much you’re choosing to invest in forward-looking technology.

Improve Forecasts of Upcoming Disruptions and Opportunities

The old adage “Those who fail to learn from history are doomed to repeat it,” certainly holds true in the business world. Big data analytics can help you gather the myriad of fragmented, minuscule data points you need to form a more complete picture in order to see actionable trends and opportunities.

If we stick with Valen’s report, we see companies who are able to identify the top 10% of their market will understand where they need to focus their attack to win the most valuable customers:

big data analytics profit vertafore valen

Not all business is created equally, and it's important to understand those differences. 

Where Do You Go From Here?

Looking for more information on potential next steps? Here's an easy option: visit our data analytics page!

There’s a free e-book, articles, infographics, and a host of other content focused on providing you with strategies and solutions for making big data analytics work for you.

I’d love to know what you think about the content. Please let me know by sending me a tweet @guyweismantel

Come back on Thursday's blog when I take an in-depth look at specific examples of how data analytics are driving change in the insurance industry.

 

Guy Weismantel

Mr. Weismantel is the Vice President of Marketing at Vertafore. With 20 years of marketing and financial leadership in companies such as Microsoft, Business Objects, Baxter HealthCare, Caremark International, and Expedia, Guy’s career has focused on bringing differentiated products to market and providing the “compelling reason to purchase” for customers and prospects alike.


Guy has a Bachelor's Degree in Accounting from the University of Notre Dame, and a Master's Degree in Business Administration from the Kellogg School of Management at Northwestern University.

 

 
 

 

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