Data-driven personalization leads to better outcomes for customers
Finding out more about insurance data

Digital change is driving innovation across all sectors of the economy – and the insurance industry is no exception. New technologies and methods for data collection are disrupting every aspect of business: from the way insurance companies interact with existing customers to the way they attract new ones.

But data is not a new concept for insurance companies.

“Insurance has always been about data,” says Ryan Stein, executive director of auto insurance policy and innovation at the Insurance Bureau of Canada (IBC). “At a very simple level, insurance is sharing risk between an individual and a group of people, or an insurer. The job of the insurer is to calculate the level of risk to make sure the individual is paying the right amount. They need data to do that.”

Stein gives a classic example: If a customer lives at the top of a hill, his or her home is going to be less prone to flooding than one at the bottom of the same hill.

But if gathering information is nothing new for insurers, why has consulting firm Ernst & Young called “big data” one of the tech trends that will define the future of insurance? Because it makes processes easier for consumers to navigate, according to Stein.

“Rather than a long questionnaire to get data, [insurers are] trying to import and use data that’s already publicly available to assess a customer’s risk: whether that’s driving history, municipal data, weather patterns,” he says.

The idea is that drawing from more data means less work for the customer and more accurate risk assessment, which in turn leads to fairer premiums. Most of the data used in the process is already publicly available, and personal data provided to insurers is covered by privacy legislation, though an IBC study in 2018 showed that 60 per cent of Canadians would be willing to share more personal information if it resulted in lower auto insurance premiums.

Sonnet Insurance, an online subsidiary of Economical, a national property and casualty insurance company, is at the forefront of this data-driven personalization.

“We use third-party data to answer questions before we ask them of the fact, we don't ask them of the consumer,” says Roger Dunbar, senior vice-president at Sonnet.

“The idea is that when someone gives us their name and their address, we can fill in the blanks.”

According to Dunbar, there’s an enormous amount going on behind the scenes when a customer gets a quote on Sonnet’s website.

To make sure that customers didn’t have to “walk outside and measure how far their house is from the fire hydrant,” Dunbar says the company had to digitize physical documents from municipalities going back decades. They also drew from new data sources like real estate websites.

“Building the website was the easy bit,” Dunbar says. “It was the data architecture that took a long time. We assembled an army of people to help us build it. It took 18 to 24 months to actually build it to the point where it could launch.”

Sonnet’s work has garnered it a series of industry awards for innovation. So, while the use of data might not be new for insurers, Dunbar says that data-driven personalization will be good news for customers.

“At the end of the day, regardless of what insurance company you buy your policy from, the same information needs to be utilized. There's no way around that. That's what insurance companies do,” Dunbar says.

“We’re just doing it in a slightly different way, using technology to make it as painless and easy and transparent as possible.”

Content created in partnership with the Globe Content Studio.

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