Insurers have become increasingly sophisticated in using data, for example in setting prices, where centralised database exchanges, intensive use of medical underwriting or linking mortality rates to postcodes have all been successful innovations. However, this use of customer data is not extended to gaining a better understanding of a customer’s needs and preferences, as typically insurers take a product-centric view.
Insurers can learn from other industries where companies such as Tesco and Amazon have taken this customer-centric approach, turning customer data into customer intelligence. They have become highly skilled at analysing vast amounts of customer data to identify the right proposition for the right customer, at the right time.
This has strengthened not only new business performance, but also retention of customers and greater cross selling. With the cost of acquisition in the insurance sector up to five times higher than the cost of retention, and many product lines being unprofitable until the customer has held the product for several years, this capability in the insurance industry has huge potential.
The goal for insurers should be to extend their customer databases beyond administration and marketing, with the objective of gaining valuable insight into their customers’ behaviour, needs and preferences, together with an understanding of the real value of different customers to the organisation.
PA works internationally with insurance clients in this area. For more information or to discuss how to make your business fit for the future please contact us now.