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It used to be that the more you talked to your insurance company, the better. Whether it was auto, life, property or cybersecurity insurance, customers would pay their premium and hopefully never speak to them again until it was time to renew.
Insurers, on the other hand, were largely reactive: focused on responding to claims and primarily using data to select customers and set prices.
Now, some companies are changing the game: no longer content with calculating risks and issuing claims, they are now engaging with customers, sometimes on a daily basis, to minimise losses.
The shift from “repair and replace” to “predict and prevent,” as insurers say, is made possible by advances in technology. It also reflects a growing consensus that, as costs rise, proactive intervention is not only cost-effective but necessary. If it takes hold, it has the potential to transform the way society responds to everything from cancer screenings to natural disasters.
The insurance industry has always been interested in minimizing losses: the first insurance companies set up after the Great Fire of London hired sailors to fight the fires, and insurance research into car accidents helped push for the introduction of child car seat mandates.
Today, a more personalized approach is possible: Auto insurers opened the door a decade ago by offering cheaper premiums to customers who had data recorders, known as telematics, installed in their cars to monitor their driving.
Since then, cheaper digital sensors and improved analytics have allowed insurers to step up from tracking to advice and even direct intervention: State Farm is giving homeowners free smart plugs that constantly check for electrical faults; Chubb bought a company that makes leak-detection systems and is offering discounts to homeowners who install them.
Manulife started out by monitoring its John Hancock Vitality customers with fitness trackers and offering prizes, discounts on premiums, or other rewards for how active they were, but its efforts to encourage customers to live longer now range from discounts on fruits and vegetables to cancer screenings and full-body MRI scans.
“We’re moving from a business model that’s focused on mortality and claims to one that’s focused on helping people live longer, healthier lives,” Manulife Chief Executive Roy Gori said at a recent FT Global Insurance Summit. Vitality customers are twice as likely to recommend the program.
Commercial insurers are also now helping their clients identify and reduce risk, hoping that this will lessen the pain of rising premiums and increase their consulting fees. Chubb sends inspectors equipped with infrared cameras into commercial buildings to look for weak spots in electrical systems. Zurich advises property owners on how to install solar panels on rooftops to minimize future wind and fire damage, and helps manufacturers defend against product liability lawsuits by advising on quality-control programs.
The shift makes sense: Insurers are in a better position than their customers to spot and prioritize potential problems, but that task is becoming more complicated as losses from extreme weather rise.
“It’s essential that we convince companies that we should be a trusted risk partner,” says Sierra Signorelli of Zurich. “Not every company should have to build models to understand the impacts of climate change or try to learn lessons that have already been learned many times before.”
Most customers are interested but haven’t yet bought one: A survey of consumers in 14 countries by consulting firm Bain found widespread interest in preventive services and healthy living rewards, but fewer than 1 in 10 have actually tried one.
For this to work, customers need to trust their insurers, rather than fearing that the information they share will be used against them in the form of higher premiums. If you’ve ever paid for car repairs out of your own pocket without reporting a collision, you know what I mean. Regulators also need to be wary of insurers that cherry-pick low-risk customers and don’t do business with those facing tougher circumstances.
The potential benefits are huge: Inflation, supply-chain issues, and decarbonization efforts are all driving up the cost of replacing cars and property, and only 31% of losses from natural disasters last year were covered by insurance. And life insurers could help fund preventive care that many health systems are struggling to provide.
When customers truly come to think of their insurer as a friend, the relationship can be highly beneficial for both parties.
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