The report, “The Insurance Industry in 2011,” says in the future, gains in market will only come from insurers identifying and creatively appealing to the unique needs of potential customers.
“They will have to build loyalty and increase retention by anticipating customer needs before they occur,” the report sates.
Indeed, to offset the stagnant pricing resulting from the commoditization of core personal lines products, insurers will need to offer increasing customized product offering.
“Product and service customization is no longer just the preserve of specialty insurers,” the reports states. “Personal lines insurers are attempting more customization of their products and service to achieve a competitive advantage,”
To achieve this level of customization, insurers will be required to leverage analytics technologies to identify market need and craft appropriate products. “In order to market these new products and services more effectively, insurers are increasing their investments in upgrading information analytics, marketing infrastructure, and talent by attracting marketing and market analytics experts from the packaged goods, telecom, and credit card services industries,” the report states. “In order to drive “outside-in” strategies and focus on the customer’s agenda, they also are increasingly incorporating more sophisticated marketing analytics and segmentation techniques (clustering, decision trees, multi-dimensional scaling) to better understand customer behavior, attitudes, and preferences. In addition, they are using more powerful analytical tools (e.g., neural networks) to identify and understand customer preferences, as well as create new customer segments.”
In lines of business such as personal lines auto, location-based technologies such as telematics are increasingly becoming a competitive necessity.
“P&C insurers also are competing on innovative pricing — and technology — driven business models, such as pay-as-you-drive auto insurance via telematics,” the report states. “Moreover, because competition in personal lines centers on taking away market share from others, enabling consumers to compare prices and offering them online quote engines and price comparisons is now essential.”
Particular technologies aside, the report concludes insurance operations as a whole will need to adopt a data-centric outlook to thrive in this low-growth environment. “Information is not the preserve of only one or even a few business units; all parts of the company create and maintain it. Accordingly, more effective integration and use of information can improve the performance of all aspects of the business.”
To read what the PWC report has to say about regulatory, accounting and tax challenges facing insurers throughout the rest of 2011, click here.
This story originally appeared on Insurance Networking News.
Bill Kenealy is a senior editor at Insurance Networking.
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