Digitalisation and data analytics go hand in hand to facilitate business in the twenty-first century. The ease of collecting and storing vast amounts of data of all constituents of business has had a direct impact on the growth and profitability of a business entity.
It is now possible to get newer and greater insights into various aspects such as product design, product price, consumer’s taste and buying propensity etc., through data analytics. This has led to better decision making and strategizing, which further leads to increased customer satisfaction and faster growth.
In Insurance, every customer is required to furnish a lot of information, providing the insurance company with a lot of data. Additionally, over the tenure of a policy the transactions conducted provide even more data about the patterns of claims and customer behaviour regarding purchase and renewal. This provides the perfect opportunity to apply data analytics.
However, data analytics is a new field and is being accepted rather slowly in the insurance industry. Motor insurance is a great example for this. As the major contributor (over 30%) to general insurance premiums, motor policies could be vastly modified on the basis of data analytics.
Currently, in India the major factors that affect premiums for car insurance are the power of the engine, model of the car and the age of the vehicle. However, other factors like customer behaviour and location could also be taken into consideration, while deciding premiums.
By properly analysing the vast amount of data available, it is possible to arrive at quite precise conclusions about customer behaviour. The amount of risk a customer takes while driving, is an important factor to be considered. For example, an owner-driven car used only within city limits is less at risk, than one often driven out onto busy highways.
Source: Financial Express
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