Under Armour's Founder/CEO Kevin Plank is a beast.

He founded Under Armour as a D1 football player who recognized the opportunity in a single consumer insight - football players slow down when the t-shirt they wear under their pads gets soaked - and as a result, built an incredible company that rivals Nike. Something no one thought was possible.

He's now invested almost $1B in the company's future as a data company. It's probably not a good idea to bet against Kevin Plank or other similarly wired beasts such as Elon Musk, Peter Thiel who knows a thing or two about the power of data via Palantir etc. but more on that another time.

I mention this because another transformation powered by consumer data is starting to take shape in a much less "covered industry" but one that is directly connected to Plank's vision and aspects of his data pool.

Insurance.

People are generally more inclined to focus on the upside or opportunity in life vs. the downside or risk. This makes it a bit difficult for folks to get excited about Insurance.

But thanks to the proliferation of data from connected cars, phones, homes and wearables, the game just changed aka Insurance just became more exciting.

Authored by resident Razorfish rockstar Kirk Vaclavik, below is a quick summary of his very interesting white paper on the emerging trend tied the transformation of the industry's approach to risk.

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Insurance Transforms Its Approach to Risk

In a connected economy, “An ounce of prevention is worth a pound in cure.”

Today, more and more insurance companies are taking the wisdom of this proverb often attributed to Benjamin Franklin.

For centuries, insurance has operated on a risk-response model, where companies write checks after the policyholder suffers a loss. But in today’s increasingly connected world, insurance companies have more ways than ever to directly interact with customers to prevent risk before it happens. This emerging trend creates new sources of business value while forever transforming the tone, style and relationships the industry conducts with its customers. 

While a focus on risk prevention is not entirely new, the proliferation of data from connected cars, phones, homes, and wearables has markedly changed the game. Harnessing data, insurers can steer policyholders away from risk decisions that may lead to loss, harm, or damage. For example:

  • Drivers get real-time feedback on their driving from telematics sensors through a portal or mobile app, and are incentivized to seek safer behaviors such as smoother turning. 
  • Home appliance sensors alert owners that a stove has been left on, or that a water main could burst if not repaired soon.
  • An athlete wearing smart clothes is alerted to movement that could lead to injury and is given advice on how to correct such habits.
  • Vehicle sensors note that a vehicle is parked outside one hour before a forecasted thunderstorm, sending an alert to its owner to move it into the garage..
  • Patients and physicians are notified about a potential heart attack through biotech sensors and are enabled to act in advance of tragedy.

Consumers: Curious, Confused, and Cautious

Marketers of risk prevention must understand that most people hold an irrationally positive outlook on life[1], expecting things to go well for them. People are generally confident in their abilities, with numerous studies showing that the vast majority of drivers rate themselves as “above average” behind the wheel[2]. Simply put, people are not wired to prepare for the worst. Thus, marketers face a challenge in encouraging people to change their behavior today for preventing problems tomorrow.

Yet evidence shows that insurance customers who have experienced loss (and been fairly compensated) would have rather avoided the loss altogether, especially when property is irreplaceable or damage is irreversible.

So how do marketers encourage risk prevention in a way that consumers care about? The short answer: incentives.

Tying risk prevention methods to savings on rates, fuel, electricity, repairs, or healthcare can make the value of such efforts instantly appealing. Ultimately, both the insurer and the consumer save. But savings don’t have to be the only incentive. Contributing to a consumer’s sense of achievement in their personal health, driving acumen, or home improvement efforts can also be motivating for them to participate.

One prevention effort that is gaining traction is telematics in auto insurance. Major players like Allstate and State Farm have introduced programs that reward drivers for loyalty, safe driving, and improving their driving habits. More and more, we expect parallels to pop up across other types of property-casualty insurance, but even beyond as well.

3 Recommendations for Insurance Companies:

1 - Invest in a Collaborative Customer Experience.

An emphasis on risk prevention gives insurers more ways to interact with their customers, but it also demands that brands strike the right tone in delivering that advice. The customer experience must transform from being confrontational to being collaborative from the start, and long before or after a claim. Take extra measure to enlighten your team on the voice, tone, and persona of the brand whose experience they are designing.

2 - Audit Requisite Capabilities and Skillsets.

Evolving an insurance offering means evolving the skillset of your staff, too. As technologies like telematics, wearables, and mobile capabilities become fundamental to your product, it becomes necessary to identify the gaps in knowledge that you can fill through additional training. It also demands staffing up with data scientists or even incorporating academics who can make your product smarter.

3 - Support a Nimble IT Operation.

Reviewing capabilities should happen at an organizational level, too. Dedicating a group within an IT department to develop new processes and make use of new technologies enables greater growth and development, much like an R&D department. Insurance CTOs will also need to craft a technology roadmap to support complex-event processing through analytics, BPM, SOA and innovation in real-time customer experiences.

Insurers stand to significantly benefit from a focus towards prevention. But ultimately, the success of prevention hinges on consumers shifting their behavior. To succeed, insurers must check themselves by never ceasing to consider the consumer perspective.

[1] Sharot, Tali. The Optimism Bias: A Tour of the Irrationally Positive Brain. New York: Pantheon, 2011. Print.

[2] Roy, M. M., Liersch, M. J. (2014). I am a better driver than you think: examining self-enhancement for driving ability. Journal of Applied Social Psychology, 43(8), 1648–1659. DOI: 10.1111/jasp.12117

E: Alec.coughlin@sapientrazorfish.com; T/IG: @Alec_Coughlin

 

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