Financial Services Ireland

Knowing the “why”: analysing customer behaviour

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Knowing the “why”: analysing customer behaviour

This article originally appeared on The Alwin Club, courtesy of Kevin Koenig, EY Partner, David Bassi Executive Director at EY and Franck Chevalier, EY Partner 

The View

Automated or interactive voice responses (IVRs) are often developed to replicate call routing in the absence of behavioral context. Today, customers expect more as their experience outside the insurance sector has shown them that information and help can be made more relevant.

By applying analytics that assess both the characteristics and behaviors of their customers, insurers have powerful tools to meet higher customer expectations.

Automation shaping the insurance proposition

The convergence of technological innovations creates opportunities for insurers to tailor customer experiences in previously unimaginable ways.

Insurers are increasingly:

  • Using robotic process automation (RPA) to increase efficiency and consistency in core insurance processes
  • Adding analytics that enable the automated process to respond to customer behavior, presenting an opportunity to develop smart automation
  • Combining smart automation with advances in sensor technologies, including telematics and wearables, to analyze and respond to consumer behavior both in the virtual and physical world

The key is understanding the characteristics and behaviors of the customer.

Behavioral analytics as a critical enabler

Behavioral analytics creates a unique value proposition for both insurance companies and their customers. The benefits can range from higher acquisition rates and customer retention to more aligned product portfolios and a reduction in fraudulent activities (see Figure 1).

Figure 1 – The benefits of behavioral analytics for companies and their clients

Behavioral analysis also helps explain the why, who and what. Insurers increasingly understand who their customers are based on their characteristics, and by capturing attributes such as age, gender, income and residence. They also are able to track customer interactions.

The next frontier, focusing on behavioral analytics, allows insurers to address why customers react as they do (see Figure 2).

Figure 2 – Why customers react in a particular way

Knowing “why” the customer behaved in a particular way points to a different action by the insurer. Behavioral analytics helps insurers use those insights to tailor the customer experience through automation, creating value for both the insurer and the insured.

Innovation is emerging from other industries

Behavioral analytics were pioneered outside the insurance arena. Amazon’s recommendation engine is an example of how understanding client behaviors enables a company to provide the right offers to the right customers at the right time and through the right channel — all through automation.

Building on these innovations, financial services firms use behavioral analytics to identify suspicious activities by analyzing the behavioral patterns of their customers to flag unusual actions and automatically notify their customers. Cybersecurity firms increasingly analyze behaviors to isolate specific threats and implement automatic countermeasures.

Going forward

The emerging applications in insurance will be just as powerful. For example:

  • Chatbots, informed by financial wellness algorithms, will consider not only the characteristics of potential customers, but also their unique combinations of financial behaviors to automatically recommend products that are individually relevant.
  • Service center contacts will result in direct connection to the person or bot that can help because of insights gained by observing interactions online that occurred prior to the call.
  • Online activity will result in a proactive contact from the insurer before the customer contacts the call center, when the behavior indicates that an issue is unresolved.
  • Mobile claims apps will access vehicle telematics to pre-populate information about the accident that just occurred.
  • Agent-based cognitive simulation models will anticipate how customers are likely to respond to new situations and send signals that modify behavior to prevent a potential accident.

All of these use cases point to an improved customer value proposition that results from combining behavioral analytics and automation.

Data will be foundational

To capture the opportunities, data needs to be integrated across different customer interaction points. In parallel, as the volume, variety and velocity of traditional data increases, new data sources will continue to emerge.

Data will increasingly include unstructured data such as multimedia data or call center recordings. Insurers will need to ingest and curate information in various forms from sensors, online activity outside of the insurance context and various other collateral sources. The big data toolkit will need to expand to include Hadoop and NoSQL tools.

There will also be a need for increasingly sophisticated techniques, including machine learning algorithms, artificial intelligence (AI), agent-based simulations and cognitive computing.

The future is possible now

The question for most insurers is not if, but when and how behavioral analytics will be deployed in their own organizations. InsurTech startups are already seeking to disrupt the current insurance business model. Insurance companies are combining internally generated innovative ideas with the wider technology infrastructure.

First movers may not succeed immediately, but they will learn valuable lessons and develop relationships in the wider data and analytics ecosystem.

Behavioral analytics in combination with automation will create a compelling value proposition. Insurers would be well advised to invest in understanding and piloting now. Focusing on context-sensitive, targeted, quick-service differentiators will point insurers to high-value use cases like cross-sell, upsell and digital self-service applications.

Capturing those opportunities will generate immediate value and position insurers to deploy the technology more widely.

EY Services and Solutions

About EY’s Insurance services

Major insurance companies around the world expect to be served by professionals who combine technical knowledge with a thorough understanding of the market dynamics, industry drivers and operational considerations that impact organizations of their size and scale.

We created our Global Insurance Center to respond to this need. The center is a hub of the our network of professionals dedicated to serving this market and connects our people around the globe, sharing information and experience on current and emerging industry issues.

Our goal is to help clients address their complex issues by drawing on our broad range of services. The centers promotes our ability to:

  • Combine our global specialties and tailor them to the current and future needs of our clients
  • Offer timely insights on the most pressing industry issues across a range of international and technical perspectives
  • Maintain a strong team of professionals around the world ready to serve our clients
  • Fulfill our commitment to deliver consistent, high-quality service

Niall Corrigan

Director, Customer & Digital
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