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The Win-Win Game: How Collaboration Transforms the Insurance Industry

Technology

Aug 23, 2023 - 5 minute read

3359 Blog Post The Winwin Game Insurance Industry 416X300
Grzegorz Łoniewski Business Solution Advisor

Grzegorz has been building bespoke business-value driven solutions for over 15 years. He also has extensive research experience, which he gained during his time working in Spain, France, and Poland. He is passionate about leveraging the latest technologies to ensure a competitive business advantage. Throughout his career, he’s had the opportunity to apply his knowledge from having worked on large, multi-sector digital transformation programmes to the financial services industry.

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2988 HC Digital Transformation 476X381

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Table of contents

  1. What Are the Benefits of Gamification? 
  2. How Manufacturers Win 
  3. How Insurers Win
  4. How Customers Win 
  5. Taking Advantage of Technology  

In recent years, the insurance industry has witnessed a noteworthy trend of market consolidation. This transformation has prompted a shift in the mindset of market players, where collaboration now takes precedence over fierce competition. By embracing this cooperative approach, the industry stands to benefit and flourish. Insurers have already recognised the advantages of growing their business through partnerships with other service or product providers.  

There is a special type of joint effort game in which all parties win. This article describes how to set up this tripartite game for a win-win outcome and what benefits each player can expect. We focus here on car manufacturing and car insurance businesses; however, a similar game could be applied to other business alliances, such as domotic and insurance.  

What Are the Benefits of Gamification? 

The essence of the game lies in gathering insightful behavioural data from individual customers and fostering its exchange within the business ecosystem. This harmonious process involves three key players, each of whom emerges as a winner in their own right. 

The use of the term ‘game’ in this context is intentional, as gamification plays a crucial role. Rewarding end-customers with points for exhibiting desirable behaviour and providing insights on how to improve their driving style for safety and efficiency fosters a sense of competition and accomplishment. This promotes higher engagement among players (customers), a goal every business aspires to achieve. Gamification, often referred to as the application of motivational sciences, encourages behavioural improvements and increased activity. A 2021 study by EY revealed that 44% of insurers reported no interaction with their clients over an 18-month period, underscoring the importance of gamification to enhancing customer engagement. 

How Manufacturers Win 

The game revolves around the collection of data, made possible through the integration of modern technologies into products such as cars, motorcycles, and even household appliances. The advancement of the Internet of Things (IoT) platforms in recent years has expanded the array of options available to manufacturers, offering them previously untapped opportunities for innovative solutions. 

By incorporating these technologies into their products and services, brands can position themselves as pioneers in innovation and even thought leaders. Moreover, the data collected from end users plays a vital role in product optimisation. These users act as the best stress testers, providing valuable insights into real-world product usage.  
 
In car production, manufacturers can analyse driving styles to understand how their products or features are being used and assess the impact on product lifespan. This data can also aid in the proper calibration of features such as automatic emergency braking or driver-assist feature. 

Customers who eagerly embrace cutting-edge solutions are highly inclined to choose a car from a reputable and trustworthy manufacturer. Therefore, establishing a solid reputation and demonstrating exceptional innovativeness are key factors in this game. 

How Insurers Win

Other winners of the game are insurers. Data on car acceleration, velocity, engine speed, and breaking intensity can bring valuable insights into driving style and driver experience. These driving habits, along with factors such as frequent car utilisation and weather circumstances can play a key role in insurance underwriting algorithms. The number of driving hours, the frequency of nighttime driving, tire wear level, and the average regional precipitation level leading to challenging road conditions are also significant in raising driver risk awareness. Insurers are motivated to prevent car damage and therefore have a vested interest in educating drivers to improve their driving behaviours.  
 
Furthermore, the data captured by IoT sensors and shared by manufacturers provides insurers with crucial information for fraud detection algorithms, which can significantly impact company profitability.  

The abundance of diverse data opens up numerous possibilities for artificial intelligence (AI) applications, affecting various areas of the insurance value chain, from product development, through P&U, to claims management and fraud detection.  

Gamification as part of insurers’ services enriches the customer-centric business model by providing a much more engaging digital experience than traditional marketing concepts such as web portals or even dedicated applications. Through this approach, insurers can increase customer loyalty, build invaluable engagement, and, most importantly, tangibly reduce the number of claims.  

How Customers Win 

Customers also gain their share of victory in the game, with benefits that hold both economic importance and priceless safety resulting from improved driving styles.  

In some countries, police databases containing traffic tickets are included in the underwriting and pricing models to raise insurance premiums. However, drivers have an opportunity to lower these premiums and build trust with insurers through their driving capabilities. Insurers may offer discounts for their products based on driving scores incorporated into pricing algorithms. 
 
The availability of tools for more efficient fraudulent claims detection empowers insurers to potentially reduce premiums. Research performed by the insurance industry revealed that fraud attempts increased by 31% between 2017 and 2020 compared to previous years. Additionally, 72% of alleged fraud victims in the United States have reported increased insurance premiums, indicating that insurers may be factoring in the risks associated with fraud when determining pricing. By collecting data on driving instincts and detecting suspicious manoeuvres, the frequency of staged car accidents or fake injury claims can be mitigated. 

The educational aspect of the game is also beneficial for end users. Learning new driving skills to avoid car damage and understanding the principles of safe and economical driving habits is a big win that is often overlooked. Drivers can also receive instructions on how to optimally use the cars, leading to slower degradation of car parts, e.g., battery utilisation in electric vehicles. 
Lastly, customers may enjoy more personalised services or products as insurers gain insight into their driving habits, circumstances, and car conditions. 

Taking Advantage of Technology  

The diversity of hardware devices and software applications supporting data collection is growing at an unprecedented pace. Various sensors are tracking users’ movements and, in some cases, even predicting their next behaviours. 

The IoT is a network of physical sensors and devices that gather data and exchange it over the internet. Cloud platforms have embraced this concept, providing a scalable and reliable infrastructure to handle the massive amounts of data generated by IoT devices. With improved internet connectivity, optimised infrastructure costs, and user-friendly devices IoT technology has become easily accessible for the business. 

This accessibility extends to specialty insurance, where successful predictive maintenance reduces the risk of machine failures, unexpected downtimes, and lost revenue for manufacturers. Having IoT sensors on board and exchanging relevant information with insurers will surely have a significant impact on insurance premiums. In sectors such as aviation, utilisation intensity may be a crucial factor in underwriting and pricing, and parametric insurance could be a suitable approach.    

To further enhance the multi-sector win-win game, the seamless sharing of data through centralised solutions plays a vital role. The exchange of customer context and behavioural data within a secure business ecosystem is an emerging trend that has the potential to elevate the consolidation of the financial services market to unprecedented heights. 

In summary, the collection and sharing of data regarding individual behaviours and equipment utilisation present a remarkable opportunity to render insurance more affordable and tailored to customers’ needs. This, in turn, leads to heightened customer satisfaction — a significant victory for our business — and increased profitability resulting from reduced claim instances. 

So, insurers and manufacturers, it’s time to embrace the game! 

2988 HC Digital Transformation 476X381
Grzegorz Łoniewski Business Solution Advisor

Grzegorz has been building bespoke business-value driven solutions for over 15 years. He also has extensive research experience, which he gained during his time working in Spain, France, and Poland. He is passionate about leveraging the latest technologies to ensure a competitive business advantage. Throughout his career, he’s had the opportunity to apply his knowledge from having worked on large, multi-sector digital transformation programmes to the financial services industry.

See all Grzegorz's posts

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