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Volume 32, Issue 4

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Wednesday, 13 April 2016 05:00

A Data-Driven Approach to Risk Reduction and Customer Satisfaction

Written by  By Tara Kelly

According to a top research and advisory firm, more than 6 billion connected “things” will be in use this year, a 30 percent increase over last year. The same report estimates that 5.5 million new “things” — devices, sensors, etc. — are connected daily. By 2020, there will be more than 20 billion sensors and devices connected to form the Internet of Things (IoT).

Smart home products are a major driver of IoT adoption at the consumer level, including connected devices like smart thermostats, appliances, sensors, and more. Smart home products were featured prominently at this year’s Consumer Electronics Show (CES), and a recent smart homes market report projects that the market will exceed $58 billion by 2020.

The widespread use of smart home products — complemented by advances in communications technology — has profound implications for property and casualty (P&C) insurers. With the right strategy, companies can work with customers to avoid billions in losses and reduce claims by better protecting property. At the same time, P&C companies can also forge closer ties with their customers through proactive, permissions-based communication.

Reducing Claims and Avoiding Losses with Actionable Data

To fully capitalize on the possibilities of the IoT, companies will have to find a way to make sense of an unprecedented volume of data. By 2020, data production will increase 44 times over 2009 levels, primarily because of the billions of IoT-connected devices and sensors. For P&C companies, one obvious objective is to mitigate risk. Since up to 70 percent of property damage claims are avoidable, P&C companies will have an enormous opportunity to harness these data streams to reduce claims and avoid losses.

But to make the IoT data actionable, companies will need to use social and interactive technologies to manage the data influx. As they look for ways to use data streams to improve company performance and increase customer satisfaction, they are exploring new platforms and interactive technologies that make data actionable at the customer and operational level. Depending on the industry, this can involve methods to capture and analyze incoming data from both devices and customers, techniques to apply rules to enable automated decision-making and APIs to trigger customer communication across multiple platforms.

But how does it all come together? P&C companies can take incoming data from home devices (smart thermostats, smoke detectors, sensors, etc.) and combine it with representational state transfer (REST)-based APIs and customer information to send out incredibly timely and relevant communications via phone, SMS, email, and social media channels to both policy holders and preferred vendors to lower costs and increase customer satisfaction. This advanced preemptive action avoids claims and increases customer safety.

For example, imagine a scenario in which a sensor located in a subscriber’s home detects a water leak, transmitting data to the insurer. With an advanced communications system, the insurer can send a series of personalized messages ranging from warnings to preferred vendor information, delivering messages at set intervals, and connecting customers to assistance using the customer’s preferred communication platform.

Using the communication preferences gathered early in the customer relationship, the insurer can send an automated voice or SMS message to the subscriber notifying her of the leak and also alerting a preferred vendor (such as a plumbing service).  By quickly addressing the problem, the insurer reduces exposure to loss. And by taking care of the problem in a timely, personalized way, the insurer also builds stronger customer relationships and reduces churn.

Making a Connection with Customers

The potential for savings and risk reduction through IoT data is huge, but getting the customer relationship aspect right is every bit as important as harnessing the data effectively. And the opportunity comes at a critical time for P&C companies, which have struggled to retain customers and build loyalty in a changing marketplace.

The recent Global Consumer Pulse Research study showed that less than one-third of customers are satisfied with their carrier relationships. Only 16 percent of customers surveyed said they are committed to purchasing more coverage from their current carrier. That represents a potential $470 billion in revenue losses for the P&C and life sectors.

The current state of insurer-customer relationships is precarious, but with new data-driven solutions now emerging, forward-thinking companies can seize the opportunity to build closer relationships with their customers. Today, it’s easier and more affordable than ever to use advances in technology and data processing to deepen customer relationships via digital channels.

The key is to recognize that customers now operate across multiple channels (online, mobile, email, social media, etc.) and adjust communication strategies accordingly to achieve a more customer-centric approach. To make sure the company is there when customers need them the most, it’s critical to secure customer communication preferences and consent for future contact early in the customer relationship lifecycle.

To achieve this, companies should analyze the communication channels available to customers and ask them which platforms are preferred. This makes it possible to communicate proactively, such as by sending out alerts when a major weather event may affect the customer’s area. Not only can this approach reduce risk, it builds trust.

It’s also important to maintain accurate “small data” — customer contact information, communication preferences, etc. — to enable action on the big data flowing in from smart home devices and other IoT sources. Recognizing that customer needs and preferences change over time, P&C companies should take a more proactive stance on communication and avoid only contacting customers (or waiting to be contacted) in a claims resolution scenario.

As they open up new lines of communication with customers, P&C companies that create a dialog rather than engaging in top-down communication only will be better positioned to succeed in this changing environment. Establishing two-way communication involves leveraging the full spectrum of available data and generating new information to learn how the company can improve processes and refine products. This creates customer engagement.

To measure levels of engagement and monitor progress on data-driven customer satisfaction initiatives, P&C companies should consider a strategy such as a Net Promoter Score (NPS) approach, which features a 100-point scale in which +100 is the best possible score (everyone is a promoter) and -100 is the lowest (everyone is a detractor). NPS is used by many top brands. With questions such as how likely customers would be to recommend a product or service, NPS provides an accurate measure of customer base loyalty.

Minimizing Risk and Maximizing Customer Satisfaction

For the P&C sector, the profusion of IoT data offers unprecedented opportunities to reduce risks and proactively avoid losses. To make that happen, companies will need to evaluate their technology options and put platforms in place that enable real-time data processing and APIs to make the data actionable. Those that make the right choices can significantly reduce operating expenses by addressing minor problems before they become major losses.

But it’s important to keep in mind that customer expectations are also changing as technology evolves and consumers use new communication platforms. Customers today expect a more personalized, proactive approach from the companies with which they do business. Omnichannel communication options are now the rule rather than the exception.

Companies that leverage IoT and smart home data and use APIs that enable communication platforms to turn information into action will be able to minimize risk exposure while maximizing customer trust. That’s the path to success for P&C companies in the 21st century.

Kelly-TaraFounder, president, and CEO of SPLICE Software http://www.splicesoftware.com/, Tara Kelly has a passion for enabling clients to engage in a meaningful, data-driven dialog with their customers. As a serial entrepreneur who has developed three companies including one outside the technology field, Kelly's expertise is multidimensional but focused on creating businesses that use technology to enhance operations, service, and the customer experience.