Can single customer view help life insurers reduce their losses?

Life insurers, in particular, face a constant hurdle in trying to manage their persistency ratios–the percentage of policies renewed every year over the policy period. In 2015-16, the average persistency rate for life insurance policies in the 13th month was just 61 percent, according to the IRDAI handbook on India’s insurance statistics. More than two-thirds of life insurance policies in the 61st month had lapsed during the year as policyholders did not pay renewal premium. Globally, the persistency ratio is close to 90 percent in the 13th month and above 65 percent after five years. The acceptable persistency rate in life insurance is 80 percent for three year-old policies and 60 percent for 10 year-old policies.

In order to battle the ongoing concerns of low penetration of life insurance and low persistency ratios, every insurance company in India should adopt a ‘single customer view’ approach–via a platform that enables a 360 degree view of their consumer base. By creating and maintaining the single customer view, insurers can develop greater insights into buying behaviour, removing errors in risk assessment and eliminating fraudulent claims. A single customer view can help an insurer to offer customers a more satisfactory experience during personal interactions or even at the time of the true test–claims redressal.

Insurers can also benefit from shared contributory databases which offer external data linkages for a more comprehensive customer view. For example, with the current market requirement of linking one’s Aadhaar card to one’s bank accounts, identity verification will become a simpler process.

Such a data sharing model will become more robust as people today have to link their Aadhaar Card numbers to bank accounts, credit cards, insurance policies, equity and mutual fund investments, small savings schemes like Public Provident Fund, Kisan Vikas Patra, National Savings Certificate and Sukanya Samriddhi Yojana. It has also been mandatory for people to submit Aadhaar details if there has been a loan availed of from a bank, housing finance company, or non-banking finance company.

The Aadhaar Card is also being verified against existing mobile subscribers (pre-paid and post-paid) via an e-KYC model. Aadhaar details are also required for availing various benefits such as subsidy on LPG cylinders, the Human Resource Development Ministry's scholarship schemes, pensions and subsided ration under the Public Distribution System scheme.

There is also a vast amount of consumer information in the marketplace - structured and unstructured - such as records of insurance policies with other providers, discharge summaries from hospitals, investigative survey reports, which can all help an insurer gain a better understanding and the history of their policyholders.

With the motor insurance segment slowly venturing into the telematics field, general and non-life insurance companies would also soon have access to licence and motor vehicle records–and in the future telematics data-related to driving safety, which would enable them to understand the lifestyles and more importantly preferences of their current and potential customers.

Through the use of internal and external contributory databases, insurers are at the cusp of providing themselves with an in-depth and accurate single customer view which would bolster risk assessment, underwriting decisions and customer satisfaction levels all year round. Quality and breadth of data combined with reliable analytics will go a long way in helping insurers make better business decisions, create and implement effective marketing efforts through improved customer insights and appropriate targeting, reduce claims frauds and improve profitability. There is no reason not to begin this initiative sooner.

The writer is MD-India, LexisNexis Risk Solutions