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House holding Analytics for Insurance

House holding Analytics for Insurance

In a recent survey done by the West Monroe Partners, 2/3rds of insurance carriers indicated that they weren’t sure about the quality or accuracy of their data. Insurance as a business is driven by sales agents. Which means that nearly 70% or more of insurance business comes from sales agents. Most of the times, the end consumers relationship and day to day dealings are with the sales agent, who then interfaces with the carrier. Renewals, cross sell and retention efforts are driven by the sales agent.

 

While this works well for the carrier in terms of reach and scale, it does put them at one big disadvantage – lack of complete visibility into their customers profiles. The carrier is largely dependent on the agent to provide accurate and up-to-date information. This would include demographic data, policy relevant data, addresses etc… This opacity into customer data has many challenges:

 

Incorrect or Stagnant Data

Often when customers change addresses, or if there is a notable change in their life stage such as getting married or starting a family or getting a promotion etc…, these updates do not find their way back to the carrier.

Operational Inefficiencies / Contactability

While the sales agents are critical to the business of the carrier, the quality of customer information is paramount. Incorrect contact details such as incorrect email ids or WRONG contact numbers hamper a carrier’s efforts in cross sell, retention and even risk assessment.

Individual and Households

Most insurers look at policy holders in isolation. It may be quite possible that more than one individuals have different or multiple policies from the same insurer. As such the premium impact of the household is larger than that of the individuals. Insurers cannot optimize for cross sell or upsell keeping in mind the overall portfolio of the household.

Customer Feedback

When the policy holders relationship is with the sales agent, the carrier may not be able to get timely feedback from their consumers. In such cases, the carrier is never really sure of the end consumer experience (CX) it delivers.

 

Household Analytics

House-holding is the process of identifying connected individuals or households in an insurance portfolio. This is important from the point of view of an insurance company because it gives them a chance to run campaigns involving households rather than individual customers. It also gives them a chance to arrest cascading lapses in a household when they have a view of the households of risky customers.

 

Given a portfolio of policies, the process of house-holding involves 2 steps:

  1. Identifying individual customers (or persons) in the portfolio
  2. Identifying relations between the individuals identified in step 1 in order to be able to identify households.

 

There is a variety of information available about relationships between customers in the policy portfolio. This includes:

 

  1. The ‘proposer – insurer’ pair in every policy. (The fact that person A has bought a policy insuring person B is, barring group insurance, indicative of a relation between person A and person B.
  2. Common addresses for different customers – indicating that those individuals are staying at the same place.
  3. The nominee information and corresponding relationship information stored by insurance companies.

 

Potentially all of this information can be used to establish households, but before doing this we need to bear one important fact in mind. There are 2 kinds of errors that can occur in house-holding: False Negatives and False Positives.

We have detailed these in our white paper on Householding and it can be downloaded from here.

 

Advantages of Household Analytics

Householding is an important activity that can help unearth critical linkages between policy holders. A few immediate benefits that householding can provide are:

Contactability

By understanding which household a person belongs to, it may be possible to reach out to their alternate contact / email addresses. This is critical when there are important policy related updates that need to be communicated.

Cross Sell / Up Sell

The skill to identify and position a product that may be relevant to a household or an individual based on their portfolio can improve cross sell or upsell efficiencies. The customer will also appreciate a timely and relevant value proposition.

Risk Assessment

For an insurer, risk assessment at a household level in addition to the individual level can help write better premiums.

 

For more details on how householding analytics can help you, reach out to us below.

 

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