Other parts of this series:
Progressive insurers will not only use their data better in future. They’ll build their businesses around data and become data-powered companies.
The COVID-19 pandemic has forced insurers to relook at their businesses. They’re eager to improve the agility and resilience of their operations. They’re keen to enhance the services they provide to customers. And they’re hungry for new sources of revenue. Key to their success will be a critical asset—data. Progressive insurers will not only use their data better. They’ll build their businesses around it. I’ll tell you why.
The data monetization journey
Some far-sighted insurance providers have already embarked on a data monetization journey. This is an important step. Data monetization enables companies to unlock the value of their data. They can do this by using data to boost the performance of their operations. They can also use this asset to open new markets and generate extra revenue. There’s an abundance of data available to insurers—customer data, connected-car data, smart-home data and healthcare data. Allstate firm Arity, for example, is using its telematics data to open new markets. It’s providing valuable insights to motor vehicle dealers and repair shops. It’s even supplying data to billboard advertisers.
There’s no doubt that data monetization delivers huge benefits. Yet, that’s only part of the story. Data monetization can only take insurers part of the way to unlocking the value of their data assets. To maximize these assets, insurers should set their sights higher. They should aim to become data-powered companies.
Some of the world’s biggest businesses are data-powered companies
Want to know what a data-powered company looks like? Take a look at some of the world’s biggest businesses. Apple, Alphabet, Microsoft, Amazon, Tencent, Alibaba and Facebook (See illustration below). They are all data-powered companies. And they’re all well placed to thrive in a post-pandemic environment. Their agility, resilience, links with customers and ability to scale are business superpowers.
These companies have put data at the core of their businesses. It’s central to their decision-making. It’s embedded in their business strategies. And data management, governance and security are critical to their success.
Are data-powered companies born or made? That’s a good question. Almost all the top data-powered companies are digital service providers. They started life as technology companies. Yet, firms from other industries have begun transforming themselves into data-powered companies. Goldman Sachs is a good example. The company is investing in analytics and artificial intelligence (AI) technologies as well as technology skills. It wants to become a data-powered company that provides customers with knowledge-based services. (See illustration below). Low-interest rates and sluggish economic growth will prompt more financial service providers to try to unlock value from their data.
Eighty percent of the value gained by using AI and analytics to monetize data comes from operational advances, business growth and new revenue opportunities. This value is the result of what my colleagues and I call “applied intelligence”. Data drives the growth and expansion of the business. The remaining 20 percent of the new value comes from bolstering the “data foundation”. Value is created by improving data efficiency, trust and quality.
Big insurers can learn a lot from Goldman Sachs. They have vast reserves of data that could yield considerable value. They also have access to an array of third-party data sources. Traditional insurance activities are likely to remain under pressure for quite a while. There’s no better time to start releasing the enormous value of this critical asset.
In my next blog post, I’ll discuss some of the challenges insurers need to master to become data-powered companies. For more information about data monetization and data-powered companies have a look at these links. They provide plenty of useful insights.