Wind the clock back a couple of decades and insurance proposal forms comprised half a dozen questions, and the vast majority of customers bought insurance face to face and were offered a price or a rejection very quickly.
Enter stage left aggregators introducing the convenience of on-line shopping for insurance. In the early days the mantra was always ‘get the customer to price as quickly as possible’ – so still the question sets were short and the process simple.
Fast forward to today – and the on-line application process is becoming ever more complicated. The biggest challenge for insurers is the ‘drop off’ from the number of customers starting the quote process to the significantly lower number of customers completing the purchase. It is no surprise that the more complex the question set, the more customers that are lost along the way.
Undoubtedly risk assessment is a key driver behind the increasing complexity of the questions. Business leaders are increasingly aware of their accountability for ensuring that every conceivable risk that could directly affect their organisation is identified, assessed and controlled.
This growing focus on risk control has led to an obsession with data. Insurance Companies are drowning in data, believing more is better. However there is a real danger that this focus could be limiting not boosting growth.
There is much talk in the Insurance Industry about simplification – instead we have moved to more complicated application forms with customers asked to provide a mountain of information. Actuaries are demanding more data before they are comfortable agreeing the rating – and financiers want to break down the risk scenarios into greater and greater detail believing that is essential to make profit.
The danger of an extreme dependency on data is that it could end up suppressing the willingness to experiment, stifling any sort of truly creative, outside-the-box thinking. It breeds a culture of fear of trying something new – since it’s not yet tried and tested and proved by metrics. Unfortunately, these fears block innovation. The real question should be what percentage of all the additional information makes a real difference to the risk?
Risk assessment is of course essential – but there needs to be a balance. Using the 80/20 rule, it is probable that 80% of risk can be assessed with 20% of the requested information. Using agile technology, it should be easy to test, learn and adapt simplified products to engage consumers and introduce innovation back into the market.
So, you can let fear dictate the way you do things which means that you will gather mountains of data, spend a lot of time and money formatting it, getting it into your system and have to repeat the whole process with ever increasing frequency to maintain the growing volume of data for what is a miniscule change in pricing. Or you can try a new approach – being different can give you an edge.