Five things insurers need to do right now to reap future rewards from open data

Andrew Thomson, Executive Manager – Insurance

By Andrew Thomson

Insurers have always loved data.

An open data revolution promises to deliver troves of new factors for insurers to leverage, with open banking likely to be particularly fruitful.

But, if Australian insurers wait until the Consumer Data Right (CDR) legislation is passed by parliament, more nimble competitors will cut their lunch.

Here are five things Australian insurers need to do right now to reap their fair share of future rewards from open data:

  1. Know your strategy now

While the CDR may take a little longer than first expected, it will likely arrive at some point in 2020.

If you don’t have a clear view on the implications for your strategy, you should aim for clarity, urgently.

Yes, take-up in other parts of the world has been slower than expected, but it’s very possible one of your local competitors will get it right.

Remember; Australians have a history of embracing innovation. If a trusted brand cracks a compelling marriage of convenience and value, we could see dramatic changes in the marketplace very quickly.

You should be ready to turn-on your new approach as close to CDR legislation as possible.

  1. Consider what you can trial right-away

CDR doesn’t invent new bank transaction data, it merely makes it more easily portable.

In the meantime, customers are unlikely to download and share their transaction data in low touch, low margin use cases. The discounts or product benefits on offer are unlikely to justify the effort.

But there are higher value, higher touch use cases where the savings and product features could be more significant, for instance life or income protection insurance applications.

Similarly, in car insurance, bank transaction data tells us how much is spent on fuel, where and when fuel is purchased, where a customer travels and how often without the need to resort to telematics. Our analysis suggests that application of this data could enable some car insurance customers to enjoy discounts of up to 30-40%.

And there are many other examples where the use of transaction data could quicken an application process, despite the need to download and forward statements.

For instance, transaction data might help a new home insurance customer estimate the value of their home’s contents more quickly than a back of the envelope calculation. It could also eliminate the need for car insurance customers to calculate their annual kilometres and quickly help them simplify their product choices.

Insurers could learn a great deal from dipping their toes in the water immediately and taking a ‘test and learn’ approach.

  1. Search for optimal convenience

While we want a good deal, we generally want to spend as little time as possible both shopping and applying for insurance.

When open banking arrives, your need a technology solution that seamlessly incorporates banking transaction data at the touch of a button.

Start modelling your future customer journey now and work out what technology you need to support it.

  1. Prepare to look forward and reward your customers

Ultimately the insurer and customer are aligned on one need: risk mitigation. Neither wants to see a car accident, house fire or illness.

Open banking will allow insurers to identify and incentivise future behaviours that reduce risk and to track and reward their progress.

We’re already seeing action-based incentives in the health insurance industry, with the use of activity trackers. This is an encouraging early application, but we’ve only scratched the surface.

  1. Go long on trust

As each year goes by, we live in an ever more trust dependent economy. We hop into cars with strangers, let random foreigners from Belgium borrow our houses and share more than is objectively desirable on social media.

But, in a world where information flows freely, we can make much more informed decisions on who to trust.

If the banking Royal Commission taught us anything, it’s that our reputation is only ever as strong as our weakest decisions. It doesn’t matter that most bankers are decent, ethical people. If enough customers have been dudded, trust evaporates across the board.

You will soon be asking consumers to opt in to sharing their banking and other data with you for mutual benefit. Building trust and differentiating your brand should be among your greatest concerns.

Conclusion

While the Australian CDR may take a little longer to legislate than initially expected, that’s no reason for insurers to sit on their hands.

A considered approach now could well make all the difference in 2020.

Quantium has more than 10 years’ proven experience in cleansing and curating transaction data for some of the largest and most trusted financial institutions in Australia and around the globe. We’d be delighted to speak with you about the ways in which data can be harnessed to help your business build unique and compelling insurance offers for your customers.

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