The competitive pressures in personal lines are more intense than ever and traditional approaches to gaining operational efficiency and segmenting markets are no longer enough. Personal lines insurers are investing heavily in distribution, customer experience, and product development to improve customer acquisition and retention and to drive efficiency and growth. They are also leading the way in InsureTech investment and R&D diversification. They are using AI to speed the claims process, deepening their knowledge of the customer, reducing earnings volatility through analytics, and improving self-service capabilities.
These improvements in data, analytics, and digitalization rely on modern core systems, which must remain a high priority to establish a base for future capabilities. Novarica’s Personal Lines Business and Technology Trends report provides an overview of recent market and financial trends, the active insurer landscape, technology issues, priorities for 2019 and beyond, and more than 15 examples of recent technology investments.
Personal lines carriers lead the way in AI…
High transaction volumes combined with relative simplicity make personal lines a natural choice for AI usage, especially in claims. Insurers are investing in claims administration systems that can ingest third-party data in real time to help adjudicate a claim to improve operational effectiveness and the quality of claims service, which is a key interaction with a policyholder.
On the underwriting side, many carriers are applying predictive models and experimenting with machine learning to enhance existing models. These predictive models leverage third-party big data made possible by the increased availability of personal data from social media. Carriers can classify risk and segment prospects and customers on a more granular basis using internal data and deidentified external big data, including from the Internet of Things (IoT).
…and digitalization
Carriers are also pushing the envelope in digital self-service, with capabilities enabled by technologies like voice recognition. Billing self-service and enabling multiple payment options continue to be important parts of personal insurers’ customer service strategies, including expansions to support Apple Pay and other digital wallet technology.
Carriers are also designing products for digital processes and targeting digitally oriented consumers. Generational cohorts like Millennials and Gen Z show an increased willingness to trade privacy for savings and are increasingly interested in products such as pay-as-you-drive. This results in not only massive amounts of data available to carriers, but also the ability to collect and evaluate it.
Insurers are preparing for a very different world. Carriers are hedging their bets against autonomous vehicles by providing a broader range of services to diversify income. Direct distribution has grown from 7.1% of the personal lines market in 1995 to 18.3% of the market in 2017—and the speed of growth is picking up. With the continued growth in internet sales, even carriers using independent agents are moving toward offering consumer quotes online. In addition, insurers are using other types of outlets such as banks, workplaces, associations, and car dealerships to access potential policyholders. Another approach is seen with carriers white-labeling products to tap into companies with specialized capabilities or expertise.
The pace of change will accelerate. To remain competitive, insurers need to continue to innovate and experiment. For more on the ever-changing insurance landscape, check out the Novarica New Normal 100: Digital, Data, and Core Capabilities for Property/Casualty Insurers and our Insurance Technology Case Study Compendium 2019.
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