Published : 7 years ago, on 10/04/2018

By Scott Logie, Customer Engagement Director, REaD Group

2018 has, to date, been a year of global petitioning for diversity. The media reports about equality increase daily, therefore it was no surprise that, when accusations emerged surrounding how insurers calculate premiums and the potential impact ethnic names have on this, there was media uproar.

The Sun newspaper and BBC’s You and Yours’ radio show both conducted their own research into the allegations, causing the insurance industry to come under intense scrutiny. The allegations of discrimination against ethnic minority names is a prime example of why it is so important for insurers to ensure that customer data is being analysed in both a non-discriminatory manner and in the most efficient way possible. In the run up to the EU General Data Protection Regulation (GDPR) coming into force on 25^th May this year, there is a pressing need for businesses to review how they are currently examining the data they have access to. Following this, they must seek out effective ways of analysing data more intelligently to drive business growth.

Are insurers overlooking the current data they have?

The UK insurance industry is one of the most data rich industries in the world. The amount of data available to insurers has increased dramatically in recent years, with online search and telematics data playing a large part in this. And this influx of data isn’t about to slow down. Despite this, insurers do not reap the full benefits of having access to mass data. Deloitte found that 70 per cent of insurers analyse data by investigating tactically with a short-term focus. This aims to generate immediate gains and profit. Instead, insurers need to shift their focus to a more long-term approach which will help them to respond better to industry disruption and allow them to analyse data more intelligently.

The importance of transparency

Trust between consumers and insurance companies fluctuates based on current affairs. For example, following these allegations of ethnic discrimination, consumer trust for insurers will be lower than it has been previously. The Chartered Institute of Marketing indicates that over half of all customers (57 per cent) do not trust organisations to manage their data responsibly. Recent controversy surrounding the alleged harvesting of Facebook user data by Cambridge Analytica will have added fuel to this fire. GDPR provides insurers with a fundamental opportunity to strengthen the image of their own companies and the industry as a whole. Insurers who embrace the new standards of customer privacy will position themselves as trustworthy data managers with whom consumers can trust to share their personal data with. In order to achieve this, under GDPR, insurers must display greater transparency by being clearer with customers around how their personal data is handled. This then provides an opportunity to rebuild customer relationships and trust.

Data sharing becomes a two-way relationship. Insurers need to communicate with customers, but customers can use their data to aid their own insurance pricing. This can be particularly demonstrated by car insurance providers. If the consumer is prepared to share data collected from their car journeys, data already gathered by most cars, insurers will consequently be able to deliver a more custom-made policy. The consumer will then benefit from better value for money as their quoted insurance price is not based on a generic customer profile – but rather their own driving habits. Improved personalisation not only benefits the consumer, but also the insurer. It has been found that return on investment is 30 per cent higher for companies who use data and analytics to personalise their customer engagement.

How can insurers make sure that customer data is relevant, accurate and permissioned under GDPR?

Data needs to be relevant. GDPR offers insurers a chance to review their data and essentially filter it so they retain the data points that are relevant to them as an insurance company.  By doing so, the data will become more accurate as insurers will be left with a pool of consumer data that specifically meets the needs that are relevant to them.

Permission and consent underpins the process of GDPR. By ensuring that data sharing is consented to by customers and prospects, insurance companies will be able to position themselves as responsible and truthful corporations, providing a much-needed boost to their brand image, and engendering customer trust. This consent must be obtained in the most clear, simple and accessible way. Long, complex documents are going to create confusion and push consumers away. A concise summary form will be the best method for ensuring customer understanding and therefore successfully obtaining consent. Insurers such as Aviva have been quick to implement this, taking action to ensure that key pieces of information are only requested once.

GDPR: building trust between insurers and customers

As insurance is such a data-rich sector, some may argue that GDPR reduces the amount of data that insurers will have access to. However, insurers should be shifting their mindset to focus on the increased quality of data that they will have access to rather than just volume. Insurers have the opportunity to better understand customers and therefore provide more tailored communications to them. However, the success of this will be based on their ability to build an open relationship between themselves and the consumer where insurers regularly inform consumers what their data is being used for.

It is important that insurers understand the real value of the contacts they have clear consent for. They must invest time into understanding the consumers’ wants, needs and interests. Rather than viewing GDPR as restrictive, insurers must realign and become mindful of what data they are storing, where it is being stored and how the data is being used. Their data needs to become personalised.

This is where data segmentation becomes a really important tool. It is something that companies do not make the most of with only a third of marketing using segmentation. However, if used well, it can be a powerful tool in improving the quality of data that insurers work with. By carrying out data segmentation, insurers will be able to build more detailed profiles of their customers. Initially, profiles are created which would allow insurers to understand which of their customers are active and valuable, and what channels these customers are engaging through. Data segmentation is unique because it is multi-dimensional. This means sub-groups of customers are often formed that would not be discovered otherwise, opening your database to encompass more detailed groupings of customers and bridging the gap between mass marketing and one-to-one marketing.

A crucial few months ahead for insurers

GDPR clearly arrives at an essential time for the insurance industry. The regulation presents insurers with the opportunity, if they use it effectively, to rebuild consumer trust and position themselves as trustworthy and respected corporations. If insurers play their cards right and shift their focus from a business perspective to a people perspective, then GDPR will drive their business growth substantially forward.