Prevention Instead of Payouts: P&C Insurers’ New Levers for Stability and Growth
March 17, 2023
No matter who you are in insurance, financial crisis headlines will have your head swimming. Is our company safe? What are the implications for our holdings and reserves? How can we shield ourselves from unexpected claims and allow us to improve profit share while still being competitive with our pricing? Pricing is an especially hot touchpoint when the economy is still “on the edge.”[i]
Pursuing risk resilience in order to establish firm foundation
Customers want confidence and security, but traditionally what is sold is a loss-recovery contract. While most insurers are focused on how they can better assess risk, many more are now expanding to also focus on the prevention of losses and creating risk resilience for customers. The old adage of “control what you can control” is now front and center for insurers as they look at new risk management strategies as a crucial component of their underwriting and customer service strategy.
Insurers are looking at growing levels of risk and they are assessing their ability to find real stability and also grow. Can higher risk and stability and growth live in the same, balanced business model? The answer is yes. Adjustment and improvement are more possible than ever — even with growing risks. Today’s best insurance business models are those that account for competitive pricing and improved claims and loss ratios. They do this by using technology to apply pressure to risk. They make the risks jump the hurdle of expectations by working to remove risks where possible.
Today’s increased catastrophes, inflation, supply chain challenges, market environment, and pressure on profitability demand a greater focus on preventable losses and better outcomes through underwriting profitability, proactive risk mitigation to minimize or eliminate claims, and enhanced customer experiences.
Prevention is the future of insurance. Every technology that aids in prevention and risk mitigation is a technology that will give insurers a stable foundation upon which to grow, even in unstable times. A prevented claim also happens to be the ultimate customer experience.
5 levers of prevention that are designed to lower payouts and improve pricing assumptions.
To develop ongoing risk resilience, it is crucial to identify, assess, and create plans to minimize that risk. Leading insurers are leveraging technology such as IoT devices, smart watches, loss control assessments, AI/ML, and value-added services to not only assess and monitor risk but to proactively respond to it with mitigation services and actions. From concierge services to monitoring water hazards and the safety of employees, to helping to live healthy lifestyles, leading insurers are shifting to risk resilience strategies that not only drive better business outcomes but also great customer loyalty.
For property and casualty insurers, there are many technology levers that they might employ to lower payouts and improve experiences, but there are five that certainly stand out. When used separately, they will make an impact. When used together, they will redefine an insurer’s role in protecting the customer. They may ultimately rewrite the view of insurance as a recovery contractor and replace it with insurance as the beloved and valued guardian.
Lever One: Loss Control
Loss control is quickly becoming the new guardian at the gate of business. Using photos of vital systems, AI-based comparative tech, and built-in risk scoring, loss control gives carriers a new eye into facilities. Designed to be easily used by field personnel, agents, and underwriters, loss control can also avoid field visits through customer-guided surveys – allowing insurers to reach more customers cost-effectively and have a better risk view of the entire business portfolio. It improves as it grows. Using machine learning, claims data matched with original photos give carriers accurate insights on industrial, commercial, and residential property risks.
No matter how you look at it, loss control efforts will improve claims ratios. Insurers can either deny coverage to organizations with higher risks or make valuable suggestions that will save businesses and individuals from future claims. To find out more about the benefits of loss control, listen to Majesco’s recent podcast, Rethink Risk with Loss Control, and be sure to look into Majesco’s industry-leading Loss Control 360.
Lever Two: Sensors and Sensor Data
There was a time when semiconductors and silicon chips were the best investment money could buy. Today, the same might be said for sensor design and manufacturing. The growth of the Internet of Things and the abilities of edge computing will keep the sensor market growing for decades to come — even if insurers don’t take advantage of it. For carriers, however, sensors are proven to prevent claims and there is almost no limit to the amount and type of sensors that might be employed to keep people and property safe. New, valuable sensor technologies keep popping up all the time.
Since 2020, Moen has offered smart water monitor and shutoff sensors, sump pump failure sensors, and moisture sensors for the home, claiming that they can decrease water damage incidents by 96% and severity by 72%.[ii] If a leak begins, Moen’s smart system can shut off the water and even empty water out of the lines using smart faucet technology. At least ten large insurers have agreed to give discounts to those who have a Moen Flo Smart Water Shutoff installed.
Just last month, State Farm announced that it was giving customers one million free Ting sensors to help prevent electrical fires. The Ting sensor can pick up on home electrical anomalies that average people would never notice. These types of sensor-based policy improvements are only the beginning of the new era of secure property. As insurers begin to understand and monitor sensor data points in real-time, they will start putting the pieces of data together. For example, an insurer might link sensor data with sub-zero temperature data, vacationing homeowner data, and smart-home thermostats to change the circumstances of risk.
Lever Three: Real-Time Data and New Sources of Data
Risk is multi-dimensional. It is “visible” in all sorts of data, from weather to seismic activity to headlines and even social media. In fact, recent headlines highlight the fact that even social media posts can create new risks for persons and property.
Insurers are no strangers to geo-information. Property databases abound. The amount of relevant data about risk is growing. But real-time data is so broad in its potential that it deserves to be continually considered.
Let’s use social media data as an example of both risk and prevention. A social media post on vacation can increase a homeowner’s burglary threat. How do insurers suggest, prevent or incentivize homeowners regarding their social media use?
Social media can also lend insights into increased business risks for commercial properties. For example, did a restaurant add a new outdoor space with a dozen mounted heaters, an outdoor bar, and an expensive canopy? Can insurers monitor the web for relevant data concerning insured businesses, including things like unclaimed accidents, property expansion, code violations, or policy discrepancies? Majesco’s Analytics Solutions, for example, is pulling in new sources of data to be used with advanced analytics to help insurers.
Lever Four: Pending Risk Data and Timely Communications
Pending risk data is crucial to property insurers. This would include weather data, fire data, geo-political/social instability, crime trends, economic trends, or any data that might alert customers to upcoming potential risks and how to prepare or minimize the impact.
When paired with mass communications (or targeted communications), warning data is often used for preparations that will greatly save insurers in the midst of a high claims catastrophic event. Are homes at risk? What can the insurer suggest to lower claims? Are vehicles in the path of secondary risks, such as flooding? How can the insurer work to move them to higher ground?
Most risks of this type have corresponding risk mitigation strategies that should be ready to roll in the case of an event. Once a pending risk has turned into a real event, the data collected before and after is also useful in lowering response costs, sending responders to the appropriate areas of the event, and getting claims processes started as quickly as possible. Majesco’s Core Suite for P&C and partner EcoExchange for example, help insurers effectively communicate with customers.
Lever Five: AI and Machine Learning
Every claim is a teachable moment, provided that the organization is ready to learn. In this particular lever, any kind of data — real-time, sensor, pictures, video, geo, historical, structured, or unstructured, — can be held up against the backdrop of claims to uncover new trends, new corollary features, and analytic insights that humans may never have recognized. It is the new world of data that will provide a growing shield of protection. In this case, prevention relies upon both AI technologies, greatly improved data management and warehousing. For carriers to take advantage of it, they need to cross a capability bridge that includes both a refined data architecture and an improved ability to make analytics accessible and understandable to the business user. Majesco’s Analytics Solutions, for example, help users to tailor dashboards and reports, making it a short step from intake to insights.
Preventive levers as a case for a new core
Each one of the levers has the potential to make an impact through lower claims, lower costs, and improved service. Yet, taking full advantage of the levers is best considered in the light of a modern core system designed for optimal use. Today’s core handles data better than ever before. It creates digital opportunities by uniting all of the best features and capabilities with pre-defined integration points and API-first design. For carriers that have calculated the potential of reduced claims, a modern core and all of its associated benefits will seem like a “no-brainer,” especially when organizations consider the savings associated with core system consolidation and lower maintenance costs. Pursuing prevention will lead to a foundation of stability — from the core through the customer.
Are you ready to shift from a focus on payouts to a model that prevents them? Majesco is helping insurers today to make this shift.
[i] Kalish, Ira, “Is the global economy starting to recover?,” Weekly global economic update, Deloitte, March 6, 2023