Is your flood risk capability up to the task?

Published on May 3, 2012 in insurance, location intelligence and managing risk. 0 Comments Tags: , , , , , , , , , , , , , .

Jarno SeegersBy Jarno Seegers

I was driving into work today contemplating the irony of widespread flood warnings during a period of national drought. In fact this video from the BBC shows just how much can change in the space of seven days.

It would be tempting to throw our hands up and cry out “Only in England!” But the truth is that extreme weather events are hardly specific to the UK. Plus water management is a far more complex issue than many like to make out.

DEFRA’s Climate Change Risk Analysis 2012 is very clear about what we can anticipate going forward. Global warming – whether or not you believe it is caused by human activity – is happening and, as a result, we can expect more unusual and bizarre weather events. In particular, it predicts significant increases in the frequency and severity of flood events in the years to come.

In this context, property owners need to ensure that they have adequate flood insurance. While insurers will have an even greater duty to accurately assess risk, provide effective cover and manage their exposure appropriately.

This becomes doubly important when you consider the ABI Statement of Principles in the Provision of Flood Insurance is highly unlikely to be renewed, leading to the effective development of a free market model driven by competition.

In the past, when flood damage payouts were an infrequent and generally minor expense, assessment systems that used postcode-centroid analyses and failed to account for elevation data may have sufficed.

However, the rising cost of flood risk claims and the increase in areas with a heightened propensity to flood means underwriters can no longer rely on those tools to provide accurate guidance on exposure and the potential for profit/loss.

We can expect more unexpected weather events going forward

The cost of claims seems to rising inexorably. The Insurance Council of Australia, which collates statistics from general insurers, estimates a figure of AUD$ 2.4 billion for insured losses from the Queensland floods of December 2010 and January 2011 alone.

The latest data and locational intelligence systems can geocode individual properties at rooftop level, giving a far better estimate of flood risk, as well as their statistical exposure to a variety of other perils including flooding, subsidence, crime, arson, earthquake and wildfire.

We’ve been warned to expect the unexpected and of the likelihood of more frequent catastrophic weather events in the further. Does your existing system offer the granularity needed to accurately assess and manage flood risk effectively?

Are insurers listening to the Voice of the customer?

Published on April 25, 2012 in Customer Communications, General insurers, Retention and insurance. 0 Comments Tags: , , , , , , , , , .

Tim Spencer, Pitney Bowes SoftwareBy Tim Spencer

It can be easy to believe that consumers are only interested in finding the lowest price available when buying insurance.

Good news then that Ernst & Young’s global ‘Voice of the Customer’ report has dispelled this myth, revealing consumers consider brand, financial security, insurer interaction and service as important factors. Another widely-asserted myth that it dispels is that consumers resent insurers trying to sell them additional products. In fact the results show that many consumers even prefer them to do so if it is done in a way that is convenient and delivers greater value.

According to the survey, UK consumers are far more likely than their European counterparts to research, purchase and interact with their insurer online. However, a significant number also prefer to buy through a broker or via a call centre. So we can see that whilst online is now a critical component, it is only one part in a wider customer engagement strategy.

The survey’s findings on retention also make for interested reading, with 40% indicating they are fairly or very likely to change insurer at the next point of renewal. This is before they’ve even received a renewal price, indicating their relationship with their insurer is fragile and churning is now the expectation!

This statistic merely confirms what we have all known for a long time regarding business and marketing models that are geared to acquisition and not renewal. When it has never been easier to quickly source competitor quotes, it no longer makes sense to depend on renewals as a result of customer inertia.

Are insurers responding to the Voice of the customer?

If the current modus operandi is negatively impacting on lifetime customer value, why are insurers continuing to penalise loyalty? The industry as a whole accepts the benefits of being more customer-centric, which leads me to believe it has to be the systems and mechanisms for customer interaction that holds them back from operating differently.

So what technologies and support is needed for the transition? Here I have to agree with the comments of Geoffrey Godding and John Cooper writing on Insurance Insight:

“Only agile companies with short product lifecycles and flexible operating models will be able to adapt to future technology advances.”

Consumers’ future preferred methods of interaction with their insurer may be difficult to predict but their expectations, whatever the channel, are clear. They want to feel like they’re dealing with a single organisation which understands their insurance needs and rewards their on-going custom.

Disconnected systems and processes built around individual product lines or business functions are unlikely to ever be able to deliver this, leading to a frustrating experience for consumers.

They also impact on cross-selling opportunities as, for example, what is the incentive of taking out home and motor insurance with the same provider if the reality feels like interacting with two completely separate businesses anyway?

In truth, the lessons to be learnt from the voice of the customer boil down to good old-fashioned common sense. Consumers are crying out for convenience and good value – and the insurer that is best able to provide this is most likely to get their business.

Data drives competitive edge

Published on April 12, 2012 in Solvency II, data, insurance and location intelligence. 0 Comments Tags: , , , , , , , , .

Tim Spencer, Pitney Bowes SoftwareTim Spencer

I recently read an interesting article in Post by Sarah Adams at Ordnance Survey discussing how location intelligence can help insurers target good risk customers giving them a competitive edge.

I certainly agree with Sarah that those with the greatest insight into their customers and associated risk profiles will always derive a competitive advantage, whatever happens going forward. Insights derived from location intelligence underpin almost every activity in the insurance sector, as a better understanding of where a property is located in relation to its risk elements enables more accurate policy pricing, better loss ratios and ultimately a more sustainable business.

However, with the sheer volume of data available, the success or failure of all of these activities is dependent on the accuracy of the underlying data and the systems employed in deriving insight from them.

Risk management is continuously evolving and we are seeing some insurers exiting markets in unprofitable areas, such as flooding, because they do not have sufficient data to accurately predict them or because they are not satisfied with their data quality or management processes, citing incorrect information, missing or misfiled data, duplicate records and inconsistent standards that lead to significant costs, delays and an incomplete understanding of the truth.

Such organisations need to urgently address these data quality and management issues, not only to meet Solvency II, but also to continue to develop new lines of business.

Data quality and location intelligence go hand-in-hand in delivering a competitive edge

The key for insurers to gaining a competitive edge is to gain a holistic view of their book of business and make faster, more accurate assessments of their risk and exposure which comes from good quality data AND effective location intelligence. It requires getting to grips with the sheer volume of data and moving from managing it to leveraging it for competitive differentiation.

Go a step further and embed this insight into analyst workflows and it provides the ability to visualise the information against a variety of perils meaning insurers are able to confidently undertake complex geographical risk analyses much more quickly and easier than ever before.

How well are insurers communicating with an online audience?

Published on March 29, 2012 in Customer Communications, Digital Communications, General insurers, Social media and insurance. 0 Comments Tags: , , , , , , , , , , .

By Shaun O’Leary

Fresh off the back of the recent Customer Experience in Financial Services conference it seems like a good time to consider just how well insurers are communicating with their customers. I attended a number of sessions focussed on meeting evolving customer expectations and enhancing the customer journey, but how much of this positive talk translates to the current reality?

A quick Google search would suggest not too much. In fact, according to Global Reviews most recent quarterly UK Insurance benchmark survey, most brands in the UK Insurance market are failing to provide even the most basic required level of online customer experience.

Having considered several hundred online criteria based around the needs of consumers researching and applying for insurance products online, the report suggests four key areas in which these websites can be improved. These include steps to ensure prospects do not abandon the quotation process midway through, improve conversion rates and implement self-service tools that encourage customers to interact with their insurer direct rather than through an aggregator.

I find this focus on the online customer experience interesting, as it’s a channel that will only increase in importance. Large sections of the population are already comfortable managing everything from their bank account to their weekly grocery shopping online, and it’s also easily the dominant means of researching and purchasing insurance.

The vast majority of an insurer’s customer base are now wholly at ease using the web and smartphones to manage many aspects of their lives. And I hear many comments from colleagues, friends and family expressing their frustration that their insurer is lagging behind in letting them manage their interactions and communications in way that suits them. The most oft repeated observation is that insurers still insist in sending hard-copy to customers who would now rather receive them electronically.

How well are insurers communicating with an online audience?

With this in mind I’m encouraged at the results of some research sponsored by my colleagues in the USA, ‘The Drive to digitisation in Insurance: Turning “Big Paper” into Big Profit.’ While acknowledging that enormous potential still exists for the digitisation of documents – one of the largest insurers has over three million boxes of archived paper documents – the results show insurers are already investing in improving their capabilities in the area of digital capture, digital creation and e-delivery.

Perhaps the Global Reviews survey is right in that there is a gap between what consumers now expect and what insurers are currently capable of delivering. However, it is clear there’s a lot of work going on behind the scenes and that the industry is fully aware of the changes needed in order to meet evolving customer requirements.

In a world where digital content and communications are being applied to every aspect of business and society, insurers have no excuse for being left behind.

Do your systems really enable your business?

Published on March 20, 2012 in Corporate insurance, General insurers, data, insurance and managing risk. 0 Comments Tags: , , , , , , , , .

Tim Spencer, Pitney Bowes SoftwareBy Tim Spencer

Recent high-profile outages at mobile network providers serve to highlight our dependence on communication infrastructures and IT systems. And they also serve to remind us of the fragile nature of reputation and brand equity.

Of course, dependence on technology is hardly restricted to telecommunications. There are few sectors and companies that would escape unscathed from a major systems breakdown and the insurance industry is no exception.

Just as smartphone users have come to rely on their handset to provide instant access to messages and data, the ability to effectively capture, manage and utilise data underpins almost every aspect of an insurance business. Recent advances in underwriting, billing and broking systems; the use of the web to allow direct access to consumers and the rise of the aggregator market have all demonstrated how technological advances have played a central role in driving the insurance business.

But given the volatility of the industry and the speed with which disruptive technologies now take hold, there’s no room for complacency.

I read an interesting blog on Post by Phil Race that addressed this very issue. One particular comment in Phil’s blog post specifically grabbed my attention:

“I know of one Australian insurer running its entire business on systems supported by a team whose average age is 54 (yes, average). Do I have any volunteers to be on their board in 10 years’ time?

Whilst many core and legacy systems will have served their owners well over past years, the foresighted are looking to see how they can leverage new technologies and marketing techniques to build differentiation and sustainable growth.

Holding onto inflexible systems and not investing in the people and technologies that can create business value are not an option for growth or, for that matter, survival.

Ask yourself if your current systems really meet the needs of the business.

  • Can you generate a customer-centric view of your policy-holders?

    Technology underpins reputation and brand equity

  • Can you identify households and policies you’ve written across that household?
  • Can you communicate with your customers via their channel of preference?
  • Do your customers get a good experience, however they interact with you?

If your objective is to drive up retention rates by building a more customer centric business or if you see the customer experience as being critical to developing improved lifetime values, then targeted investment into processes, systems and enabling technologies can offer a great deal.

In my opinion the benefits of upgrading to contemporary technologies outweighs the costs and challenges involved in adapting legacy systems that may not have the capacity to do what’s needed. Phil and I are clearly advocates of employing the latest breed of technology to address single points of failure and limitations, but I’d love to hear your thoughts.

Social Media in Insurance reviewed

Published on February 24, 2012 in Customer Communications, Social media and insurance. 0 Comments Tags: , , , , .

By Shaun O’Leary

I listened this week to a very interesting Marketforce webinar on Social Media in Insurance, featuring David Williams of Axa and Hannah Squirrell of Bennetts. It was great to hear that despite insurance being a highly regulated industry, there are already a number of successful examples of social media being deployed to enhance interactions with customers. Particularly commendable is how Bennetts has organically grown from 265 to 32,000 Facebook fans in a short timeframe.

The panel’s own experience suggests engaging with social media doesn’t require significant upfront resources. However, the background customer communications systems do need to be in place to be able to manage this influx of information effectively without creating new data silos. It also suggests the conversation has evolved from how to implement social media towards identifying where it can help the organisation as a whole in achieving its business objectives.

The immediacy of social media has provided insurers with a golden opportunity to build lifelong customer relationships and create customer touchpoints at all times of the year, not just on renewal. Communicating with customers via their channel of choice can transform the way they deal with customers, help insurers to gain deeper layers of insight and remove perceptions of the industry being slow and unresponsive, especially when dealing with complaints.

One thing that did surprise me was the results of a poll carried out during the webinar:

Final piece of a jigsaw

Seeing the full picture; improved customer insight can benefit all departments

“If you had to focus your investment on one aspect of the customer lifecycle, what would it be?”


  • Acquisition – 40%
  • Loyalty and Retention – 33%
  • Servicing – 21%
  • Customer Insight – 11%

Now of course insurers, like any business, exist to be profitable, but this seems to me a slightly limiting view of the power of social media and what harnessing it effectively can achieve. In my view, consumers don’t respond well to direct selling through social media, yet it provides a rich untapped source of customer information that can be harnessed to increase profitability and improve the customer experience. Therefore I’d prioritise building customer insight as this can feed into improved strategies for all areas of the business, including acquisition, retention, customer service and product innovation.

This also seemed to tally with the views of Hannah Squirrell, who points out that Bennetts doesn’t do any direct selling through its social media channels and yet has seen record sales through the improved levels of brand awareness and customer engagement that this activity generates.

I’d be interested to hear where other people think social media can add value for insurers. I’ll also be keeping an eye out for further interesting deployments.

Location intelligence can help tackle insurance fraud

Published on February 20, 2012 in insurance and location intelligence. 0 Comments Tags: , , , , .

Jarno SeegersBy Jarno Seegers

We are currently witnessing a vigorous drive from Government to tackle Britain’s damaging ‘compensation culture’, due in part to the increase in spurious and exaggerated personal injury claims being made against motor policies following road traffic incidents.  According to the ABI, more than 1,500 whiplash claims are being lodged every day of which the fraudulent claims are costing the motor insurance industry an estimated £2bn a year. This is not good news for drivers either, as it also adds an average £90 a year to their premiums.

Despite the problems inherent in dealing with fraud, there are solutions that can help claims investigation teams to detect fraudulent claims.

Capturing the accurate location of a road traffic incident has notoriously been difficult for insurers. But now, GPS technologies and Location Intelligence (LI) solutions have vastly improved the process and can quickly help to identify anomalies or inconsistencies in submitted information. In a wider context, LI can help to pinpoint crime and fraud hotspots, highlighting potentially fraudulent activity clustered around specific locations, enabling the identification and flagging of specific claims for investigation.

As a further step for enabling efficient claims management and identification of fraud, insurers can look to provide motorists with access to a self-service portal as part of their membership.  Following any road traffic incident the customer can immediately log on and interact via a mapping interface to identify with their insurer the exact location of the incident. The insurer can then add location co-ordinates of the car repairer and the home address of the claimant and third party to provide the best visual picture to make an informed decision.

This process saves insurers operational costs as it removes the need for loss adjusters to visit premises by enabling accurate analysis to be performed remotely. However, it is equally as important to provide appropriate communications infrastructure that enables claims to be quickly processed via the channel most apt for their customers’ situation, providing a quality customer experience during a period of incredible stress.

Handcuff covering the word 'fraud'

Location Intelligence can help pinpoint insurance fraud

Of course insurance fraud is not confined to motor and fraud patterns constantly change. As quickly as the industry uncovers one scam and puts processes in place to mitigate against fraud, another is brewing under the surface. Unfortunately the economic downturn only seems to have exacerbated the problem. Insurers must take the matter in hand and be vigilant for fraudulent claims and applications and look to see how they can help protect themselves and their genuine customers.

Insights derived from location intelligence really do underpin almost every activity in the insurance sector as it not only enables more effective claims management but also more accurate policy pricing, better loss ratios and ultimately a more sustainable business.

Quality data underpins business efficiencies and Solvency II

Published on February 7, 2012 in Solvency II, data and insurance. 1 Comment Tags: , , , , , , , , , .

By Shaun O’Leary

According to recent news, Solvency II may be introduced in 2015 instead of 2013. However, this does not mean that insurers should delay work to get their ‘house’ in order.

Many technology firms are promoting point-level Solvency II solutions, however, in my view insurance companies may be better off enhancing their core capabilities, especially in the areas of data quality, geocoding and data enrichment.  In addition predictive analytics can help companies master the complex relationships between customer demographics, market trends, buying patterns and location. In this way, insurers can not only comply with Solvency II requirements in the most cost-efficient manner—they can actually improve their overall business operations and impact on the bottom line.

There is no question that the ability to accurately measure assets and calculate risk can have significant impact on cash flow and investment capital. If insurers over estimate they could be at a serious competitive disadvantage.  This is why insurers appear to be taking advantage of the EU Directive’s option for them to develop and certify their own internal models to calculate solvency capital.

While adopting an internal modelling approach will no doubt help insurers get their capital calculations right, in my view this investment will not really pay off until the calculations are underpinned by accurate, complete and appropriate data.

House

Insurers can't delay work to get their house in order

Poor data quality can impact the modelling process in a number of ways such as calculation failures, punitive default values, increased manual intervention, and delays in model updating.  This can ultimately lead to an increase in the level of capital to be held as the regulator places a capital charge on top of the firm’s own assessment.

Unfortunately, in my experience, many insurance companies are not satisfied with their data quality, citing incorrect information, missing or misfiled data, duplicated records and inconsistent standards that lead to significant costs, delays and an incomplete understanding of the truth. Considering that one needs to aggregate and account for market risk, operational risk, credit risk and insurance risk across every country and multiple lines of business, it is easy to see why data quality is so important.

Why now is the time to reconsider your flood-risk assessments

Published on January 27, 2012 in General insurers, insurance and managing risk. 0 Comments Tags: , , , , , , , , .

Jarno SeegersBy Jarno Seegers

Flooding has risen back to the top of the agenda for a number of reasons, not the least of which is the approaching  deadline on June 30th this year. On this date the estimated 6 million householders whose homes are considered to be at risk of flooding (of which some 560,000 are classified as above the 1 in 75 level) may find it difficult to renew their annual insurance policies, as it will be just 12 months before the current ‘ABI Statement of Principles’ on flooding expires.

As a result, we are seeing increased levels of media attention to flood risk insurance, as well as increasing concerns amongst the public and politicians alike.

In various iterations since 2000, the Statement of Principles has established a mechanism to ensure flood insurance remains available for the majority of homes at risk. Whilst it has delivered on its promise, the industry has long recognised that there are some serious flaws to the agreement and I believe that it is time to look for a more sustainable long term solution. Indeed, the ABI has made clear in its most recent response to government that the agreement will not be renewed in 2013.

Many insurers have worked hard to ensure flood insurance remains affordable and available despite the rising flood risk within the UK. However, with the prospect of a move to a free market model, where insurance is priced purely by the assessment of risk and driven by competition, the industry faces the challenge of accurately assessing flood risk levels and integrating these into their risk, exposure and pricing models. The scope of this ‘new’ market is not insubstantial, with some suggesting homes worth up to £214bn could fall into this ‘new’ market segment.

UK properties already suffer approximately £1.3bn in annual damage from water and sea flooding, not to mention localised flooding incidents by the country’s ageing infrastructure.  So with the risk of flooding on the increase it’s clear that insurers are going to need to utilise accurate data to assess flood risk if they are going to compete effectively and manage their risk and exposure properly. Assessing flood risk according to the nearest postcode centroid simply won’t provide an accurate enough assessment of real risk, nor will it support competitive market pricing when competitors have the ability to evaluate the propensity to flood according to the specific location and elevation of an individual property.

It’s well known that there are a significant number of properties that technically fall in or close to a high-risk zone but enjoy a more elevated position and are unlikely to be affected by flooding in the vicinity. It will therefore be possible for the insurer with the most detailed location intelligence to offer the best value and capture what could well be lucrative long-term business. And just as importantly, to identify the most high-risk customers to ensure the premium they are asked to pay is a fair contribution in relation to the heightened level of risk that they entail.

Flooded street in the UK

Insurers must manage flood risk more effectively

It’s also worth considering the value of improved locational data in terms of exposure density management. With the ABI estimating the average claim following the 2007 floods being between £20,000 and £40,000, insurers clearly need to be able to measure and manage their exposure density effectively.

Ensuring that risk is estimated as accurately as possible is of course nothing new. But the impending deadline and the potential for climate change serves as a reminder that insurers can’t be complacent. Those with the greatest insight into their customers and associated risk profiles will always derive a competitive advantage, whatever changes occur.

Is it time for the insurance industry to embrace the digital switchover?

Published on January 25, 2012 in Customer Communications, General insurers and insurance. 0 Comments Tags: , , , , , , .

Tim Spencer, Pitney Bowes SoftwareBy Tim Spencer

If you’ve turned on your television, read a newspaper or walked past a billboard recently, the chances are you’ll be fully aware of the UK’s digital TV switchover.

This got me thinking, where has the insurance industry got to on its own journey of digital transformation? In particular, how close are we to seeing the widespread use of electronic and online delivery of renewal notices, policy schedules and other customer-facing documents?

For the insurers there are a number of benefits associated with transitioning a large proportion of their customer base to electronic and online document services. The most obvious one is the significantly lower operational costs that could be realised through lower printing and mailing costs.

Moving customers to email and online services has the potential to deliver a range of fringe benefits. With customers opted-in to email communications and enrolled to online services, the delivery of timely and finely targeted communications becomes operationally feasible and far more cost effective. When combined with the use of customer analytics, insurers have the capability to run data-driven and minutely segmented campaigns that  serve up targeted and timely offers to customers at the right time and in the right way. This opens up opportunities to drive follow-on, cross-sell and referral business in a way that doesn’t alienate the customer.

At a basic level, it’s clear that many customers are now comfortable with electronic document delivery and web-based kiosk services, so long as they feel in control. Our belief is that this is a trend that it likely to grow, especially as the younger generation become policy holders. The challenge will be to convince the great majority that there is more behind the move to digital than a cost-cutting exercise. Communicating the benefits to consumers throughout each stage of the digital TV switchover is something that has been handled particularly well and is, perhaps, a good case-study for insurers wary of committing to investment in this area.

The Digital Switchover robot

Is it time for insurance to go digital?

A successful transition is likely to involve the development of systems oriented around the needs of the customer and a strong commitment to promoting the benefits that they bring. We believe that technology should be seen as an enabler to developing a more customer-centric business and not a barrier. Some general insurers have already made the move and are beginning to see the benefits, not just from the operational efficiencies delivered, but also from additional business resultant from providing customers the services they want in the way that they want them.

It’s not beyond the bounds of imagination that policy holders will manage their cover more effectively and actually increase their commitment if they can do so in a way that is quick, easy and convenient. Adding another named driver onto a car insurance policy for a short period or increasing cover for a high value item just purchased are two examples that immediately spring to mind. And many customers would prefer to access their schedule and policy documents online rather than keep reams of paper filed at home.

Consumers already research, compare and buy many insurance products online. The use of the web can and does extend beyond the research/discovery and purchase processes and insurers should take advantage of the move to digital and offer services that meet customer expectations. The insurance industry needs to adapt quickly to be ready for the digital change and it is encouraging that there are some insurers who have implemented or are already in the process of implementing innovative digital solutions.