Katie Jameson is the Head of EMEA Marketing at Act-On Software
When it comes to handling and interpreting data, the insurance sector has often been at the forefront. It was one of the first to start hiring staff specifically to manage databases – something which is now a familiar practice – and has a model almost exclusively assembled around statistics and understanding its customers.
Despite this, insurers haven’t been as quick to adopt marketing automation. For many, the notion of adapting and personalising communications across an expansive target audience spanning across a varied number of different generations, niches and products is still an enormous test.
Because of the huge sum of variables, from renewal dates to individual customer knowledge, switching over from manual processes can sometimes seem like an almost futile job.
But the insurance sector is one that could profit considerably from marketing automation, which can help providers improve lead generation and adjust the journey to the respective needs of each customer.
To cut through the noise and successfully market to prospects, insurers and sales teams, communications need to be bespoke for each recipient. The term marketing automation can often make people think of mass emails, but it is much more than that. Marketing automation shines the brightest when it comes to personalisation, and both artificial and predictive intelligence will play a bigger and bigger part in this space over the coming years.
Marketing automation platforms can help process databases and produce significant insights for the many segments insurance companies target, like when customers are online and what their favourite channels are. A good platform must then be capable of turning this insight and segmentation into action, by using the customer data to accommodate communications in the best way.
Doing this converts into higher sales effectiveness, more inbound and outbound leads, and increased customer loyalty, all while reducing the work involved and the demand for expensive reporting.
It can be combined with many other aspects of marketing too. A properly adaptive journey not only incorporates email, but also involves the customer via SMS, banner and social media ads – wherever it will work best for them. A good multi-channel marketing strategy in itself can be a way for insurance companies to diversify themselves, making their messages seem more appropriate and timely than those of their competitors, and at the same time supporting the brand direction.
Real world results
Physicians Insurance, a provider of liability insurance for clinics, physicians and hospitals in the US, has been marketing to new buyers to counter the recent the decline of physicians leaving independent practices to work for large clients and hospitals with its own self-insurance programmes. It found its previous software couldn’t keep up with demand, and failed to deliver targeted content that addressed the specific needs of each buyer.
With a large chunk of its revenue coming from maintaining its core book of business, the company decided that retaining customers, and using a more relational approach, was a critical component of its strategy.
To do this, the insurer distributed three monthly newsletters. The first supplied resources to help companies curtail the risk of medical errors, the second delivered thought-leadership pieces, and the third was shared with brokers to educate them and aid in servicing clients. Through marketing automation, the company was able to segment the audience by job title, specialty, geographic region and even size of clinics, and the lists were synced automatically to ensure the company’s huge database was always up to date.
Physicians Insurance then tailored the content in the newsletters to each group, making it easier to alert administrators to potential cyber threats and even offer obstetricians online courses about new developments in managing post-partum hemorrhages. Overall, marketing automation cut down Physicians Insurance’s time consuming operations and tackled managing and segmenting their lists manually. It also had a major impact on the results, helping the company achieve a 95 percent customer retention rate – considerably higher than the industry median of 84 percent – and driving open as high as 31 percent for existing clients.
Furthermore, marketing automation gave insights to help build on their marketing strategy. Act-On tracked and assessed how and when buyers interacted with messages so Physicians Insurance was able to build and adapt strategies depending on their audience segments, providing more detailed insights.
And in the UK, RSA Insurance – one of the world’s longest standing insurers – used Act-On and marketing automation to break through the noise of their brokers and risk managers’ inboxes as it found its previous system sent emails straight into “junk mail” folders. Like Physicians Insurance, RSA Insurance’s former method of marketing was time consuming, difficult and lacked a strategic plan based on analytics.
RSA Insurance used marketing automation to create and deliver professional emails and landing pages simply and clearly. Its ability to A/B test and report on email performance enabled RSA Insurance to further refine their emails and messaging, which resulted in an increase in open and click-through rates across its various email campaigns.
The results show why automation is set to become an essential strategy for insurers to approach the right clients and nurture the right prospects, all while maneuvering through the highly competitive insurance market.
It may well be argued that the future across all sectors is adaptive and personalised, and the insurance industry won’t be an exception.
Katie Jameson is the Head of EMEA Marketing at Act-On Software, a leading provider of marketing automation and one of the fastest growing tech companies in North America. She has previously implemented, integrated and executed programmes on a variety of marketing automation platforms at industry leading companies such as Symantec, Paywizard, and ResponseTap.
COMBATING INSURANCE FRAUD WITH MACHINE LEARNING
By Georgios Kapetanvasileiou, Analytical Consultant at SAS
Most insurance companies depend on human expertise and business rules-based software to protect themselves from fraud. However, people move on. And the drive for digital transformation and process automation means data and scenarios change faster than you can update the rules.
Machine learning has the potential to allow insurers to move from the current state of “detect and react” to “predict and prevent.” It excels at automating the process of taking large volumes of data, analysing multiple fraud indicators in parallel – which taken individually may often be quite normal – and finding potential fraud. Generally, there are two ways to teach or train a machine learning algorithm, which depend on the available data: supervised and unsupervised learning.
In predictive modelling or supervised learning, algorithms make predictions based on a set of examples from historical data. You can present an algorithm with historical claims information and associated outcomes often called labelled data. It will attempt to identify the underlying patterns in fraudulent cases. Once the algorithm has been trained on past examples, you can use it to infer the probability of a new claim being fraudulent. AKSigorta Insurance is using advanced predictive modelling as part of its investigation process. The company has managed to increase its fraud detection rate by 66% and prevent fraud in real time.
There is a wide variety of predictive modelling algorithms to choose from, so users should take into account issues such as accuracy, interpretability, training time and ease of use. There is no single approach that works universally. Even experienced data scientists have to try different methods to find the right algorithm for a specific problem. It is, therefore, best to start simple and explore more advanced machine learning methodologies later. Decision trees, for example, are an excellent way to start exploring complex relationships within data. They are relatively easy to implement and fast to train on large volumes of data. More importantly, they are very easy to understand or interpret, and can be a good starting point for new business rules.
Other options for more accuracy
Decision trees can, however, become unstable over time. When accuracy becomes a priority, practitioners should look at other options. Support vector machines (SVMs) and neural networks are capable of learning complex class boundaries and generalise well to unseen cases. They have been extensively used for fraud detection. Tree-based algorithms, such as gradient boosting and random forests, have also become more popular in recent years. Ideally, analysts should try multiple approaches in parallel before deciding what works best.
Supervised learning is effective in identifying familiar cases of fraudulent activity but cannot uncover new patterns. Another challenge is the limited numbers of fraud examples with which to train the algorithm. Fraud is a relatively rare event, after all. The ratio between fraud and nonfraud cases can sometimes be as much as 1 to 10,000. This means that predictive algorithms tend to be overwhelmed by the sheer volume of nonfraud cases, and may miss the fraudulent ones. Labelling new data for training a model can also be time consuming and expensive.
Unsupervised learning algorithms are trained against data with no historical labels. In other words, the algorithm is not given the answer or outcome beforehand. It is merely asked to explore the data and uncover any “interesting” structures within them. For example, given certain behavioural information, unsupervised learning algorithms can identify groups (or clusters) of customer transactions that appear similar. Anything that appears different or rare could be flagged as an anomaly (or an outlier) for further investigation.
Unsupervised learning methods can, therefore, identify both existing and new types of fraud. They are not restricted to predefined labels, so can quickly adapt to new and emerging patterns of dishonest behaviour. For example, a New Zealand health insurer used unsupervised learning methods to identify cases where practitioners were deliberately overcharging patients for a particular procedure or providing unnecessary treatment for certain diagnoses.
Unsupervised anomaly detection methods include univariate outlier analysis or clustering-based methods such as k-means. However, the recent move towards digitalisation means more data, at higher volumes, from a wider range of data sources. New algorithms, such as Support Vector Data Description, Isolation Forest or Autoencoders, have been introduced to address this. These may be a more efficient way of detecting anomalies and allow for faster reaction to new fraud.
Social network analysis
These methods are useful for identifying opportunistic fraud. However, many fraudsters today operate as part of professional, organised rings. Activity may include staged motor accidents to collect on premiums, ghost brokering, or collusion between patients and health practitioners to inflate claim amounts. These career fraudsters can repeatedly disguise their identities and evolve their way of operating over time.
Social network analysis is a tool for analysing and visually representing relationships between known entities. Examples of shared entities could be different applicants using the same telephone number or IP address, or a motor accident involving multiple people. Social network methods can automate the process of drawing connections from disparate data sources and visually representing them as a network. This significantly reduces the investigation time – in one case, from 10 days to just two hours. In the UK, a large P&C insurer made £7 million savings per annum by uncovering groups of collaborating fraudsters using network analytics.
A hybrid approach
No single technique, however, is capable of systematically identifying all complex fraud schemes. Instead, insurers need to combine sophisticated business rules and advanced machine learning approaches. This will allow them to cast the net wide, but improve accuracy and reduce false positives, making fraud detection more efficient.
FALLING INSURANCE PREMIUMS DON’T NEED TO BE A CAR CRASH FOR INSURANCE COMPANIES
By Manan Sagar, Chief Technology Officer for Insurance at Fujitsu UK&I
It’s no secret that buying car insurance can be a frustrating experience. Probably one of the most common complaints is the lack of accuracy around pricing and the increased charge for customers’ ongoing loyalty to a vendor.
Therefore, it’s been a welcome relief for customers as the price of premiums continues to drop within the UK car insurance industry; decreasing by 1% in the third quarter. This has been pushed down by uncertainty from the personal injury discount rate change in July 2019 and the market watchdog’s interim report on general insurance pricing practices.
However, this is less exciting for insurance companies. It’s a worrying sign for the way the industry currently works, and this warning should be taken as an indicator that it’s time to change lanes in the way we approach pricing practices in UK insurance.
Out with the old, in with the accurate
The hinderance to customer satisfaction for insurance companies has been the result of generic circumstantial ‘repair and replace’ pricing systems. Insurance premiums in this archaic model are based on historical data which makes projections about potential outcomes based on trends. This often causes specific groups of people – such as young adults – to be penalised as underwriters and actuaries use past data sets to look for loss patterns and make projections about future outcomes.
As a result, this has created a conception that insurance providers have unfair and inaccurate prices, and unfortunately digital transformation in such a model is limited to enabling “easier” purchase and claims processes.
But now technology is giving insurance companies the opportunity to alter this model. Traditionally prices are formulated through a calculation of stakeholders: the client + the broker + the insurer. But now the addition of technology providers has increased insurers’ capabilities to process, analyse and use data to provide more tailored premiums and accurate results. In other words, technology is enabling insurers to become a force for good, and rather than just reimbursing for damages and losses, to predict and prevent these from happening. In the grand scheme of things, this would benefit not only the industry, but society as a whole.
For example, rather than filling out generic questionnaires to conclude a pre-determined price, technology will be able to look at current and real-time data to consider the customer’s behaviour before establishing a price point. This means insurance companies will have capabilities to offer more bespoke policies that better reflect their customers, their lifestyle and their needs. In some cases this precision will reduce insurance costs on an on-going basis – the benefit being an increase in customer satisfaction and retention.
This is all possible thanks to technology that already exists. Powerful analytics tools and the Internet of Things (IOT) has opened the door for insurers to provide “smart policies”, and make dynamic projections about future outcomes, calculating pricing models based on this new approach. For car insurance, this means that data can provide insights not just into when and where, but also how the customer drives – ultimately promoting safety on roads. Some car manufacturers like Tesla have already spotted the opportunity and have, earlier this year, announced that they will be offering insurance to their car owners in the US at a 30% reduction.
The insurance industry has its brakes on
Increases in customer satisfaction and customer retention are no doubt the goals of every insurance company, and achieving this through digitisation seems like a promising offer.
However, it’s not that simple.
Insurance is an age-old industry that is deeply rooted in the traditional business model it currently operates in. Most of these companies are also big, which makes a change of this nature more of an upheaval than an agile step-change.
This has made actions within the digital transformation process, such as implementing automation to harness the power of “data”, extremely slow for some organisations. But insurance companies need to think how they can start adapting to the new customer demands, and how they can revolutionise their own industry and stay relevant.
To get in gear, insurance companies need to challenge their traditional mindset and see technology as a supplement to their services. Ultimately, to thrive in today’s market, insurers will have to shift their focus on prevention, and “smart policies”. Soon enough, policyholders – whether the public or businesses – will no longer accept the old way of doing things.
The UK car insurance industry is at a cross roads. And how well insurance companies use technology will determine whether they go down the route of futureproofed customer experience, or a dead-end.
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