Insurance Innovators 2022 product innovation panel

Hear from an auto insurance expert and a life insurance expert on how data is transforming the experience for companies and their customers – for the better.

Speakers:

• Rob Nendorf, Director of Data Science, Arity
• Matt Gabriel, VP, Head of Advanced Customer Analytics, John Hancock

Transcript

Moderator:
Okay, so I’m going to get comfortable and whilst I install myself, let’s start with you guys telling the audience a little bit about what it is that you do and for whom. So Robert Nendorf, start with you first.

Rob Nendorf, Arity:
Sure. Yeah. Hi, Robert Nendorf. I work for Arity, which is a mobility data and analytics company. I’m the director of data science there, and as a company we’re very focused on creating better experiences for drivers, communities and businesses by understanding driving behavior and driving risk. And so I have the privilege of working with really about the largest data set that has driving data connected with insurance operations data. And it really helps us to help our client auto insurance companies manage telematics programs and build much deeper connections to their customers. And that’s kind of where it fits in from a personalization lens is it gives you sort of new kind of data and insights that you can act on to help understand who your customers are and how you can help them specifically.

Moderator:
Okay, fantastic. Matt?

Matt Gabriel:
Sure. Matt Gabriel. I’m an actuary by training, but most recently I’ve kind of moved into the data science space. So I lead a team globally responsible for Manulife and John Hancock to lead advanced customer analytics. So ways we can improve the customer experience using advanced analytics and data science techniques. Really bringing together all of the different data points across the customer journey, interaction data, transactional data together so we can understand the voice of the customer, which is what the customer says when they’re talking to us and interacting with us, but more importantly, it’s what they do when they’re done and so that we can see end to end how that journey unfolds and try to bring services to really create a meaningful experience with them.

Moderator:
Okay. Guys, thank you so much for that introduction and also thank you for your time. I know that you’re very, very busy and we appreciate the fact that you are here with us today. And to our audience, we will try to take your questions, I promise. I know we’ve been battling against time, but do send in those questions via the app and we’ll see how far we get, but I’m sure that they can handle it. So listen, let’s get things going now by just looking at the current landscape. What do you see as the latest developments in data-driven AI for that personalization? If I can start first with you, Robert, and then bat it to Matt.

Rob Nendorf, Arity:
Sure. So I think what we see is a real kind of continuation of auto insurance companies maturing in these capabilities. Everyone’s sort of on this journey of figuring out how to collect more and better data and also figure out how to mature their AI capabilities. And so what we’re really seeing is when people can bring in new sources of data to give them new insights about their customers in parts of the insurance business that maybe they haven’t been before. So we’re very focused on driving data and driving data is something that’s been used from an insurance standpoint for years, but it’s really once you have your customers and you’re talking about renewal pricing for instance, but there’s a lot of opportunity to use that sort of data to create an entire new class of kind of services that create very personal experiences. So a good example of that is collision detection. So that’s something that we actually work with sort of non-insurance mobile app partners. They use it all across the country and we’re seeing insurers start to incorporate that service into their products. And it definitely fits in under the protection umbrella from a sort of P&C standpoint, but it’s a very different service than what we’ve seen in the past. And it’s also very personal to the customer because you’re creating new chances to engage with them in positive ways

Moderator:
And not.

Matt Gabriel:
I think building on that is exactly right. Where are you at today? Companies are all at different places and I think it’s important to think about the end-to-end customer experience. There’s stuff you can do with your first-party internal insurance company data if you’ve spent the time and effort and really made the investment to make it accessible and analytics ready. An M D M system might master your data, but it’s not necessarily an analytics-ready data set. So I think it’s important to think about how do you invest in your infrastructure and in your analytics infrastructure so you can bring these solutions to market, but also don’t ignore things like a third-party service that could just be layered in on top and create a great personalized experience. I think that’s where we at our company have a wellness program integrated with our life insurance contracts. We were able to build that independently of fixing our old mainframe legacy systems. It sits on top of them and interacts with them, but it’s sort of outside. I think that’s another way to think about it. You didn’t have to rebuild your entire customer experience in order to offer some of these driving programs on top of an auto carrier. So it is nice to think about where you can stitch things in.

Moderator:
Let’s broaden things out, Matt, because look, predictive analytics key tool, how are they helping you to build that holistic view of the customer to get the overall picture?

Matt Gabriel:
So I think it’s first investing in your data. You need to get the data ready, but what predictive analytics lets you do is understand and drive those insights on top of it. That could be something like predicting someone’s servicing need. Someone’s playing around on the website trying to log in and having issues. So instead of waiting for ’em to call your call center and ask for a password reset, let’s just text them and say, look, we think you’re having trouble with our website logging. Can you click this link to reset your password? That actually happened to me about a month ago with, or maybe it was six months ago, a tree came down to my yard and I called Comcast and actually the voice prompt system was like, “Hey, we noticed there’s an outage in your area, are you calling about some issues?” And with three or four prompts, I was able to tell them that my wires were down, there was a tree down and they sent someone out to service. It was the best customer service call I’ve ever had, and it was with a Comcast. It’s rapid. It was quite rapid. And because they’ve connected all these data points together, they can see service outage weather in the area was bad and he’s calling into the call center. It all correlated to that outcome.

Moderator:
Very impressive. So look, moving it along though, Robert, how do you think insurers can best use AI and data to make informed offers at the right moments? In a sense, your experience is the flip side of that because clearly they did use the data and everything to actually calculate, look, there’s a problem, you’re probably affected. So in respect of your area, how can AI be used?

Rob Nendorf, Arity:
Yeah, so it’s really interesting because a lot of companies like ours have created these amazing opportunities to use new data, new analytics, but I think for insurers it’s also important to think about where the new partnership opportunities are. So when it comes to offers, for instance, there are a lot of apps out there that are really focused on a user experience in financial services and personal finance apps like Credit Karma, WalletHub, Chime, and they’re building these really amazing personalized user experiences that are kind of coaching people, educating them about personal finance, and it’s actually a great opportunity to layer on insurance opportunities. And so beyond just what you can do within your own brand, I think people should be thinking about how can we partner with these other apps that fit in very nicely with your brand and bring these new opportunities. And so for us, we try to partner with these apps to make sure that our technology is integrated and makes that very seamless. And so now within an app, you could be there for personal finance and then get these very sort of precise personalized insurance offers that just fit in sort of beautifully with that app experience. And so that’s a whole new channel sectionally for insurance companies to acquire customers and then bring that sophistication all the way through to pricing at point of sale.

Moderator:
And let’s stay with that idea, Matt. I mean, from your perspective, what does or should product personalization look like?

Matt Gabriel:
That’s a great question. I think it’s something that’ll evolve over time too. I don’t know if what we think it’ll be today is what it’ll end up being, but there’s been some great examples brought up even at the conference I think this morning about even the keynote really talking about how do you make sure that your communications are clear and personalized and speak like a human well, how do you also make sure that you remember the last three reasons the person called in and you’re referencing that, right? So a lot of that is how can you bring the data together, predict why they’re calling, predict what the best route is, and then get that built into a process so that your customer service rep can handle it. I think eventually we’ll get into things where our wellness program is a great example. It’s in our best interest as a life insurer for our customers to live as long and healthy as possible.

So we built a program with shared value, we call it our shared value insurance model, where the longer they live, the more premiums we collect, the more we can pass back to them in discounts and we can incentivize them. And then we actually partnered with Allstate as one of their, they have I think three life insurance customers that are, or three life insurance carriers that are providing insurance to their network. And so if you have a vitality program, which is what we call our wellness program, and you’re an Allstate customer, we can give you discounts on your life insurance because you’re participating and proving that you’re a healthy driver. So these partnerships as well across carriers, very different carriers can still be, I think extremely valuable to a customer and a form of personalization.

Moderator:
Yeah, it’s rewarding customer loyalty as well.

Matt Gabriel:
It’s rewarding for sure. Yeah.

Moderator:
Look, looking at personal personalizing propositions, Robert, I mean it’s great, but there is no game without pain. What are the complexities if that is what you’re striving for, and how do you actually bypass them, get over them?

Rob Nendorf, Arity:
Yeah, well a great example of that is that sort of privacy and consent are paramount. And so as you’re pushing to make more personalized experiences, you want to make sure that you’re also really managing your data effectively and respecting people’s privacy and giving customers real transparency into how you’re operating and give them chances to sign up for extra personalization. And so we’re very focused on that and we’re bringing driving data into insurance pricing. So FCRA compliance is just foundational for us, but beyond that, we’re very focused on finding the right partners that respect people’s privacy and manage the data accordingly and offer a lot of transparency so that people can consent to the way their data is being used to create this personalization. So there are a ton of challenges in this, and that’s why I think it’s important for insurers to kind of find the right partners to help them navigate the landscape.

Moderator:
And this is something which is going to come up constantly that because you’ve got so much data, it’s this failure on the path of the customer giving so much away the sense of trust using it properly. But Matt, I mean, look, how is the increasing penetration of iot actually giving insurers access to that wealth of data and also leveraging it to create more tailored products. Again, it takes you deeper into this whole security and trust thing really when you’re trying to do the right thing by your customers.

Matt Gabriel:
Yeah, no, I agree. And like I said, I can speak from the life insurance perspective where the wellness program that we’re doing, that’s really our most obvious use of internet of things, and it’s done in a way that it’s shared value for the customer, shared value for the carrier. We pass that benefit back on and it’s very clear that they’re giving us this information, we’re using it for that reason. We are also very clear that we will not use that information in underwriting. It’s separate. We’re not using it to help inform future underwriting decisions. And I think underwriting, especially in the life insurance context, is an area where we have to be very careful about what types of data we bring in and there’s evolving regulations, which are great. I think it’s helpful to have a regulatory framework, especially as it becomes robust and fair. But the thing I really want to make sure we’re avoiding is that we’re not treating people differently for something like race or gender or anything that’s not tied to actual expected mortality.

Moderator:
One way on, I look at this again as the outsider peeking in through the window, it’s really about making sure you do the right thing by your customer. It’s also making sure that there is some power in the relationship, but also we talk about how customer behavior is changing. But do you ever get to the feeling, Robert, that we can move to a point where now when we’re taking insurance, we look at the price, but at some stage customers won’t actually look at the price as the reason for buying insurance. So for example, it could be things like personalization because so much about me within reason, you are almost like my friend and therefore I can trust you. So it doesn’t really matter if the premium goes up because everything else that goes with it is satisfactory. Do you see that moving in terms of customer behavior?

Rob Nendorf, Arity:
Yeah, certainly. Price is a big factor in people’s decisions to buy, say auto insurance. I think insurers want to avoid a race to the bottom to get completely focused on price and essentially have the product completely commoditized. And so I think personalization and customer experience and these kind of value added services like collision detection, other things can kind of give you new value added services that you can use to compete on in a more positive way as opposed to just trying to find the lowest price. Having said that, competitive auto insurance pricing is really about two things. One is bringing down your overall operating costs so that your average price is lower than competitors, but the other is understanding the precise relative risk of each of your customers. And that really is personalization. So we think of personalization across the customer experience, but it includes pricing. And so I think as insurers can bring new data sources into the point of sale and into the pricing, they actually get more effective. It’s not either or. So I think we’ll end up in a place where pricing is always very important, at least in P&C, but these other services can play a stronger and stronger role as we get more mature in –

Moderator:
There’s a bit of a balance between the two. Yeah, okay. But look a question to both of you, but I want Matt to tackle it first and then Robert, because again, whenever you are talking about personalization, there is the view that it can be intrusive. So I guess the challenge for insurers is increasing personalization while at the same time staying within a customer’s comfort zones. How do you do that? What is the comfort zone, the safe spot?

Matt Gabriel:
Oh, I think mean you made a good point about consent. Having consent early on or being very clear, we’re going to take this data and here’s what we’re going to do with it for you is really important upfront. But I also think that this isn’t something that’s done in a way that’s going to be creepy. If anything, it’s going to be more natural than our current experience. If we can actually understand, hey, I know why you’re calling and I can help you relate to you as a human with empathy because I know what the process is much better or I know what experience you’ve gone through, it’ll be a much better experience for the customer as opposed to sort of the automatic way we have our call centers operate today, for example.

Moderator:
Okay, love it.

Rob Nendorf, Arity:
Yeah, that’s a great point. And I think I would just add that auto insurance personalization sometimes gets a bad rep, but really what companies are trying to do, and I thought the keynote was just an absolute perfect demonstration of this is get better at delivering customer value, improve the experience for their customers. So I think for most insurance companies, it really comes from a very good place. So yeah, consent, transparency are extremely important. I think as an industry we have to really listen to consumers. Consumers are starting to speak up more and more on this and consumer advocacy groups, we need to listen and adjust our practices based on where these privacy trends are going. I think that’s very possible. And I think even what we do for auto insurers, which is sort of capture this very rich driving and mobility data, which is very personal to people, there are ways to manage that data to get the essence of what you need out of it while still respecting people’s privacy.

And we sort of continue to lean in from a technical standpoint of getting better and better at working with that data without compromising privacy at all, and to the point where we only know the very essence of what we need to know and we really get rid of everything else. So it’s partially a technology challenge. It’s partially a sort of consent and transparency challenge, and it’s partially just a challenge of you have to listen to your customers and hear where they want you to go and where some of the boundaries are and be respectful of those.

Matt Gabriel:
Just to add to that, I think insurers have been in the business of having personal information on our customers for a very long time, like 150 year track records managing customer data, and we’re going to absolutely, I think as an industry, we’re going to take it more seriously and be more cautious with how we approach anything related to personalization or use of data than other companies out there like a Facebook or TikTok or whatever. They’re going to be much, they’re collecting data that you might not even know they’re collecting on those devices, and that’s not what we’re using to do the work that we’re trying to do. So it’s going to be more of a direct relationship of, I know I’m giving you this information, and so I’m not surprised when you do something with it. I don’t. We’re looking, it

Moderator:
boils down to the trust thing, let’s face it. But what you’re aiming for is to have a greater trust than perhaps TikTok, Facebook has because again, there are those concerns about how the data is used and also how they’re monetizing it and punter’s not getting much out of it in return.

Matt Gabriel:
Exactly. So I think we’ve got that track record, we know what to do, how to manage personalized data, and we have 50 plus regulators looking over our shoulder

Moderator:
OK then. I mean, look, let’s project into the future. Assuming that I’m here in 10 years time and you guys are here, which I’m sure you will be, I mean, where do you think that the AI-driven customer experience could be? What is it that you are going to be telling me? What is so markedly different, Matt?

Matt Gabriel:
I mean, it feels like we might be talking about something that hasn’t even been named yet, right? In 10 years time, I don’t even know if we were talking about machine learning and ai, we were just starting to 10 years ago, right? It’s pretty new, at least in this type of business context. But I think what we’ll have seen is a lot more carriers, almost everybody will have moved all of their data centers into the cloud, a lot more insurance company infrastructure will be A P I based. And ideally, carriers have really understood how to build that sort of layer of data digitalization and machine learning that sits underneath all of their applications that are customer-facing. And I think that’s the transformation I’m hoping that insurance companies can make because I still feel like when we talk to our systems architects or anything like that, it’s a very much mainframe talks to printing system, talks to accounting system, everything goes one system to another. But that’s not how we digitize this industry. We need to have that right layer of data and analytics that can operate at every customer touchpoint.

Moderator:
And Robert?

Rob Nendorf, Arity:
Yeah, so I think on one hand we will just see a continuation of the improvement in what we’re seeing today. I think auto insurance companies will get more mature at bringing in newer types of data, improving their AI capabilities. And I think for instance, when it comes to driving data, we’ll see that really become ubiquitous at point of sale and marketing and kind of push out some sort of demographic information. People don’t want to be seen as a cohort. They want to be seen for who they are and how good of a driver they actually are. And then I completely agree with Matt that there’s a lot of fundamental change with autonomous vehicles, improvements in technology and AI, and I think there’ll be things in 10 years that we didn’t imagine today, and that’s about the only thing we can say with much certainty, but that’s also what makes it very exciting time. I think there’s a ton of really amazing opportunities and insurance right now to sort of gain competitive advantage, but also to build a better personalized user experience that really resonates more with your auto insurance customers. And I thought the keynote did such a great job of like, “Hey, wait a minute, don’t just get caught up in all this fancy data and technology.” You have to bring that together with the people in your organization and keep it human centric. And so I think that’s where we’ll see a lot of improvement the next 10 years as well.

Moderator:
Okay. Fantastic. Are you ready for some questions? Sure, please. Cool. Okay. Again, I throw them out to anybody, so whoever wants to leap on them first, go for it. You have my blessing. Do you believe that driving data acquired and scored by companies like Arity will replace credit scoring as a factor in personal auto policies? Do you believe the driving data is more accurate measurement of future risk versus credit data?

Rob Nendorf, Arity:
Is that targeted to you?

Yeah, so I think we definitely have the data to prove some of these things out, and that’s what’s really exciting is we don’t have to guess at the answer to that question. We know that understanding people’s actual driving behaviors is the best way to understand how risky of a driver they are. And that sounds sort of obvious when you say it out loud, but that’s not what we’ve been doing as an auto insurance industry for the most part, for the most of the last 150 years. So I think you’ll always need to know what car people are driving and how expensive it is. Is it a Tesla, is it a Honda Civic? That’s always going to be important, but beyond that, when you’re trying to understand who someone is and how risky they’re, from an auto insurance perspective, understanding how they’ve actually been driving is definitely going to dominate.

Moderator:
Okay. Would you like to add to that at all?

Matt Gabriel:
No, I don’t. I don’t have the P&C experience.

Moderator:
I think the “um” said it all really, didn’t it. Okay. We can squeeze in one more question. Many consumers feel like Big Brother is watching and knows too much about them. Will that be a problem going forward as we continue with AI? [inaudible]

Matt Gabriel:
SuI mean, I think that’s a talking point that comes up a lot. I think when you get down to it, I’m not sure how many customers are actually concerned for themselves at the individual level, but I also think we as an industry are not really looking to those creepy data sources that others might be looking at. We’re not, I heard a speaker at a conference a couple months ago talking about that there’s patents that Facebook has, that it uses the accelerometer to detect your voice, and that’s part of how they might get targeted ads. I don’t have the firsthand research to validate that, but it’s something I’ve heard from someone who did claim to research it. We’re looking at things like electronic medical records. How can we use an electronic medical record to better and more automatically render an underwriting decision? How do we listen to the call transcripts to understand, are you trending towards a detractor? In which case we should probably get a manager to do an outbound call and try to rescue this case or prioritize our investments in web technology or in digital technology based on where are the most detractors, where are the most calls coming in? That’s kind of work we’re trying to do right now. I don’t think that’s something that customers will perceive as creepy.

Moderator:
Okay.

Rob Nendorf, Arity:
Finally, yeah, I know we’re running up on time, but I think I would just summarize by saying people want respectful personalization. They want that custom user experience that really speaks to them, that makes you feel like this auto insurer cares about you and they want you to do it without impacting their privacy. And that’s the challenge for us is to how to balance those two things and at the end of the day, deliver for customers. And so I think we will continue to figure out how to do this better. And even with the strong privacy trends that we have, I think there’s a lot of room for us to accomplish this and balance privacy.

Moderator:
A good note on which to end this discussion, but gentlemen, thank you so much for that.