Truly understanding our customers: Data & analytics key to closing the protection gap

Life Insurance Awareness Month articulates the need to close the USD 20tr protection gap in the US. Americans' awareness of their need for protection is essential, but so is insurance carriers' understanding of their customers and potential customers. One very positive development: recent advancements in data analytics can help with this task, allowing carriers to identify and effectively engage more consumers and achieve everyone's ultimate goal — closing the protection gap.

Our industry has leveraged data and predictive analytics for many years to better understand our business, specifically how we underwrite risk. But more recently, even better data and predictive analytics is being used to model the ideal customer, find new customers who match the desired profile, determine a potential consumer's willingness to purchase coverage, predict behaviors and traits that help triage prospects, and zero in on the best way to approach and engage potential customers. As a result, our industry is becoming capable of reaching consumers that we previously couldn't reach.

Modeling the ideal client. Work is being done that allows us to predict outcomes like who will lapse, who will continue a policy after the level period ends, who will purchase a second product and what that product may be. These models are based on the individual attributes of a customer or potential customer (not a class, type or other characteristic from a group of customers). This helps us understand the business on our books, and take on better business by identifying potential customers who resemble our ideal consumers.

Propensity to buy. With the right data, we can now predict a potential customer's propensity to purchase coverage. This allows us to better focus our efforts on those prospects who want to buy most. This should result in reduced distribution costs and higher pull-through rates.

Risk triage. Predictive analytics means we can now predict the probability that someone is a non-smoker.  This allows us to determine upfront the best track to place a prospect in (full u/w, simplified issue, instant issue). Engaging the potential consumer with the correct underwriting models can be very beneficial.

Behavioral economics (BE). BE helps us determine the best way to approach and engage potential consumers. By leveraging data about a potential consumer, we can determine trends, preferences and patterns that help us engage that customer in the right way.

Data and analytics are allowing us to better understand individual customers and potential customers based on their specific traits, interests, preferences and patterns. As a result, we are better positioned to reach and engage consumers who we previously didn't reach. The information we leverage helps us better understand the customer and engage them in a process that is the most appropriate, and is most likely to be successful. Each of these advancements will be key in helping our industry close the protection gap.