Data and analytics have long been touted as the key to the future of the insurance industry, but insurers must be aware of the trust implications that come with using personal information.
Currently, the insurance industry stands at the precipice of major change and disruption. The winners will be those best placed to leverage data and analytics in a way that helps them understand their customers better and make informed decisions. However, in knowing so much about their customers insurers need to take caution when using this data, especially in order to avoid losing the trust of the individual.
Insurers could use customer data as either a reward or a punishment. It can be used for good to help the customer in the form of more product customization and tailoring, or even price discounts. They could also use the information to increase costs or introduce penalties if the data deems the individual more of a risk.
For a customer to give up their personal data to an insurer to use in pricing or risk control, there has to be something in it for them, and an increase in the cost of premiums won’t win over customers’ trust, which is vitally important according to our 2015 UK General Insurance Survey.
39.6% of consumers value honesty and integrity as the most important behavioral attribute, which indicates that in order for insurers to succeed in the use of personal customer data they need to keep this in mind, and act in a way that gives them a competitive edge but also leaves their customers satisfied. Penalizing customers for being willing to share their information would not be well received.
By Thomas McCourtie, General Insurance Analyst