Other parts of this series:
From purchasing decisions to fitness regimens to home heating and cooling, our behavior in many aspects of our lives has been digitalized. Many businesses have used this data to learn about customer behavior and deliver a better value proposition, propelling them into market leadership positions.
Now, some of these companies are beginning to enter the insurance market. As Accenture points out in its report, Spatial Risk Diffusion: Predicting the Propagation of Risk Linked to Human Behavior, these digital disrupters’ ability to exploit data will allow them to maximize their risk assessment capabilities.
The implications of that are clear: Traditional carriers that continue to rely on only their usual analytics methods and internal data to assess risk will not be able to compete with either digital disrupters or current competitors that adopt more effective risk-assessment measures.
To that end, we believe carriers should focus on understanding spatial risk—the concept that informs us about how people influence each other. That influence can reach into a neighboring zip code or across thousands of miles. And as the digital age progresses, the influential relationships that people develop will transcend traditional dimensions.
Companies in many industries—including health care and consumer retail—that have grasped this concept have found it extremely helpful. But it is particularly meaningful in the insurance industry. With this understanding, the industry can build unique risk models that allow it to accurately predict which population group will influence another—positively or negatively—and how long that behavior will take to propagate.
A few examples of lines where this new risk model should pay significant dividends include workers compensation, employers’ liability, burglary, automobile and health—particularly health risks related to smoking and obesity. Risk assessment in any line where human behavior drives risk should benefit from this new approach, helping carriers that embrace it to leapfrog over competitors in assessing risk and even, where regulations allow, pricing it.
The ability to understand the links between population groups and how one influences another also would benefit carriers’ marketing and public policy campaign efforts.
To test our theory, Accenture and researchers at the Stevens Institute of Technology in Hoboken, N.J., developed a model. In a 12-week study, the Spatial Risk Diffusion Model did demonstrate how behavioral trends affected an insurable risk and how that risk diffused throughout society over time.
To learn more about the study, download Spatial Risk Diffusion: Predicting the Propagation of Risk Linked to Human Behavior.
Next time: The Spatial Risk Diffusion Model.