Coastal property owners have been facing a growing number of problems over the last couple of years when looking to secure the future of their homes. On the one hand, potential buyers are put off by the impossibility of getting a mortgage to buy these coastal homes, and on the other, existing homeowners themselves are finding it difficult to insure their properties.
The potential consequences, including coastal erosion and flooding, could have a significant impact on people, infrastructure and natural systems and cause life as we know it to change.
Data brings a great opportunity in the quest to manage unpredictability; it allows insurers to better manage risk and improve insurance underwriting.
Insurers collect a wealth of data, but few have found a way to monetize this asset. New “data as a business” models point the way forward.
Insurers have historically collected a wealth of data, but they have been slower to monetize this asset—by creating new business lines or models to capture the value of data and analytics. As more insurance consumers move online to interact, compare products and prices, and make purchases, the volume of available data is increasing exponentially.
Even more significantly, powerful new analytics technology enables insurers to use that data in ways they had not previously considered.
However, many insurers face organizational challenges to becoming data-driven companies. Others are waiting for business opportunities to emerge before enhancing their analytics capabilities. As a consequence, insurers have lagged behind other industries in their investment in and adoption of analytics.
As first movers among insurers create new business models and seek to harness the potential of their data, those that wait will be at a significant competitive disadvantage. To become a data-driven insurance organization, firms must rethink their approach to building and managing data and analytics assets and develop distinctive go-to-market capabilities that allow them to offer clients data-centric solutions.
Many insurers will have large volumes of extremely detailed data available to them – from claims histories and risk assessments to information on policyholders and policies – but the sheer amount of it can feel overwhelming.
Another issue is that data is often not stored and managed in a ‘business-ready’ way that would allow companies to get real insights from them. This begs the question; how can insurance organisations make the most of their available data to protect not only their customers, but themselves too?
What is causing insurers to pull back?
Many home insurance plans haven’t historically included “earth movements” in their policies (see how Home Insurance Can Make Homeowners Resilient to Weather).
Anything from earthquakes, landslides, erosion or sinkholes were often overlooked because they were considered such rare occurrences that they were too expensive to be considered into premiums.
Plus, insurance companies often lacked the right historical or modelling data to assess the risks as was needed.
Times have changed and the insurance industry must adapt. Property owners must be protected from any worst-case scenarios, and at the same time, insurers should be able to protect their assets. It’s not easy to model future climate scenarios while ensuring complete policy coverage for natural weather phenomena, and this is a very new practice. But thankfully, data can be trusted to inform decisions and minimise any uncertainties.
The explosion in available customer data (both personal and commercial), the growth in analytics technologies and the rapidly declining cost of computing power and data storage are prompting companies to invest in data analytics as a means to innovate. Forward-thinking leaders across industries are pursuing opportunities to create data-driven businesses in core and adjacent markets
Saving the day with data
People don’t often think of data as part of the solution when they think about the climate crisis and how to solve it (see how AI Technology & Data Analytics Will Help Insurers).
Data is not only a renewable source but it’s also reusable, and if used in a productive and efficient way, it can work wonders to help insurers manage the unpredictability they are currently facing.
Insurance policy underwriters need relevant environmental data insights if they want to create accurate and fair policies – information which they don’t usually have readily available.
Insurance customers are starting to think about how their insurance policy fits with their lifestyle. Whilst only 12% of those surveyed had a Usage-Based Insurance (UBI) policy, 54% of people could see the value of one.
In terms of other types of risks that might be mitigated, having access to real time data about plumbing to detect leaks (21%), driving (20%), and home heating systems (19%), rose to the top. Customers would feel most comfortable sharing their data with their insurer regarding these risks.
Insurers can accurately track and predict localised climate impacts by investing in the right data analytics tools.
Through on-demand access to insight streams, whereby raw data is informed into a business-ready state, brokers can provide homeowners with a more informed analysis.
Improving sustainability despite roadblocks
Organisations from a wide range of sectors have undergone significant digital transformation over the last few years, but many businesses still find it difficult to load and transform their data at scale.
Providing the right data to the right people at the right time is crucial for insurance companies.
Data teams will be unable to react to market trends in a timely manner if data is hard to locate and extract, at the expense of their productivity.
Even if insurance organisations are aware of the importance of data, it is still common for them to come across hurdles when looking to make the most of it.
Businesses must be able to consolidate their current data sources and access them from one centralised platform with a democratised cloud data system.
The tools need to be rolled out across the entire insurance company to get the most out of the investment and benefit all areas of the business, from risk to claims management.
Having timely and integrated climate and risk data would also be beneficial for government and policymakers.
Knowing which areas are most at risk helps organisations of all kinds to plan and make informed decisions ahead of time. This knowledge could be applied when new buildings and facilities are being developed, but also in protecting existing buildings. Long-term, the goal is to use the technology and resources available to make smart decisions that benefit everyone, from homeowners to insurers.
AUTHOR: Ciaran Dynes – Chief Product Officer at Matillion