Data and technology are transforming the insurance industry by providing greater insights into customers and allowing for more personalized insurance policies and prices. Insurers can now incorporate behavioral data like diet, driving habits, and more to better assess risk and offer customized policies and pricing. However, this increased use of personal customer data raises ethical issues around privacy and control over personal information that insurers must address through practices like anonymizing data and obtaining proper customer consent under regulations like POPI.

1. TECHNOLOGY SOLUTIONS & INNOVATIONS l 25
INSURANCE
Data and tech are transforming
insurance, allowing for greater
insight and personalisation,
reports KateFerreira
he insurance business is changing, partly out
of necessity and partly thanks to the ability of
technology to help create better products.
For the former, broad global trends –
such as ageing populations and climate
change – are already having a direct effect on insurers and
underwriters are looking to tech to combat the risks.
The technology itself is driving change. According to EY’s
2018 The Future of Insurance report, it means customers’
needs are different. Ride-sharing apps and self-driving
cars mean young people won’t drive as much as their
parents, for example. Technology can also help with age-old
problems for insurers: blockchain and artificial intelligence
(AI) are improving data security and reducing fraud.
T
Avsharn Bachoo,
chief technology
officer of PPS.
GETTING TO KNOW YOU
Insurance is getting more personal, with customised
policies and risk profiles, rather than prices, based
according to demographic groups. Your life insurer already
knows your age, address, family medical history, and so
on, but increasingly they are incorporating behavioural
data – what food do you eat? How fast do you drive? – into
their pricing models. More data of this kind means more
accuracy for the insurer (which reduces risk from their side),
and the ability to reward “good” behavioural data in some
way, such as being offered lower premiums.
Avsharn Bachoo, chief technology officer of PPS – a
mutual financial services company – says PPS is in the
process of modernising its data and analytics capabilities.
The starting point was to get a single view of the
customer across their business, says Bachoo. Divisions
operating in silos and using different software created
multiple instances of the same person on their databases,
and this needed to be cleaned up.
“At this stage, the analytics platform focuses on
recommendations,” Bachoo explains. “It has the ability to
provide leads to upsell and cross-sell products to existing
PPS members.”
The next phase in PPS’ plan entails bringing in external
data, from sources like credit and data bureaus. “PPS,” he
says, “is trying to get more behavioural information about
existing and potential customers or members with a view
to targeting offers to people.” For example, offering an
investment product to a customer around the time they
usually receive their bonus pay.
IT’S BECOMING
PERSONAL
“WE ARE PREPARED FOR POPI, TO ENSURE OUR CUSTOMERS’
INFORMATION IS PROPERLY PROTECTED.” – AVSHARN BACHOO
FAST FACT
Medical aid and
medical insurance are
two different products
regulated by different
acts. In South Africa,
medical aid providers
(or medical schemes)
are regulated under
the Medical Schemes
Act of 1998, which
prohibits, for example,
a medical aid provider
from selling two
different people the
same cover package at
different prices based
on their risk profiles.
There is a strong commercial incentive for insurance providers
to have deep insight into customers or potential customers.
For example, if your medical insurance provider (not
medical aid) knows that you are pregnant based on your
claims, they could flag you for a potential cross-sell with their
investment division, offering, say, an education-focused
savings policy.
“A vast majority of Americans (91 per cent) ‘agree’ or
‘strongly agree’ that people have lost control over how
personal information is collected and used by all kinds of
entities,” says Lee Rainie of the Pew Research Centre. Similar
research about South Africans simply doesn’t exist.
Legislation like the Protection of Personal Information
(POPI) Act outlines stringent requirements for anyone who
collects, stores or processes personal data.
“We are prepared for POPI to ensure our customers’
information is properly protected,” Bachoo says. “From an
analytics perspective, when we develop our analytical models,
member data is masked, so we focus more on clustering. For
example, we won’t use one member’s information to predict
an offer for another member directly.”
For customers, tech can mean innovation in an industry
ripe for disruption, but personal customer data, and
the personalisation this enables, is arguably the biggest
“changemaker” that both start-ups and traditional insurers
must prepare for. ■
AN ETHICAL CONUNDRUM
Images:iStockphotoandsupplied