Customer centricity is changing data management in insurance companies

The influence of the customer-centric business model on data management and data modelling for insurance companies

Recently, there has been an increasing trend towards customer-centric insurance companies. Many insurance companies see customer centricity as a solution to secure a stable and growing customer base for the future and are trying to establish it within their organisation.

The transition from a contract-centred to a customer-centred business model poses major challenges for insurance companies, but also offers enormous potential. However, it is often overlooked that a customer-centric approach requires not only an adjustment of the business strategy, but also fundamental changes in the data model and data management.

The following article highlights the differences between these business models, the effects on data management and data modelling, and the necessary adjustments to the IT architecture.

From a contract-centric to a customer-centric business model in the insurance industry

Traditionally, many insurance companies are organised in a contract-centric way. This means that the focus is on individual contracts or policies, not on the customers as a whole. You can hear this directly when you ask an insurer how large their customer base is. Often, the insurer can tell you exactly how many contracts they manage in their system, but customers are difficult to count because of the large number of duplicates in customer data. For a long time, customers were not the focus, which is why some insurers did not focus on their data either.

In a customer-centric model, on the other hand, the customer is at the centre of all processes and decisions. All interactions, products and services along the entire customer journey and customer life cycle are considered and optimised. The most frequently cited advantages are better customer retention, higher customer satisfaction and the opportunity to offer personalised products and services.

Customer Data Model in the contract-centric and customer-centric insurance

The difference between a Customer Data Model (CDM) in a contract-centric and a customer-centric business model in insurance lies in the different perspectives from which insurance companies view and manage their customers and data relationships.

In the contract-centred model, the focus is on efficiently managing individual insurance products, with customers often playing only a secondary role as actors. The data structure is organised around individual insurance contracts. Each policy is often a separate entity. The customer data is stored in different systems. Most of the data is only needed to manage the contracts. Customer data is often entered multiple times if the customer takes out several contracts (e.g. car and home insurance).

In the customer-centric model, the needs, preferences and life events of individual customers are the focus. CDM serves as the basis for creating a holistic and consistent view of the customer. All data points are organised around the central entity of ‘customer’ (or ‘partner’). Contracts, claims and interactions are linked to the ‘customer’. The model enables a consolidated view of the entire customer base and the individual ‘customer’, including all contracts, claims, contact points and preferences. The customer-centric CDM is cross-system and cross-domain.

A contract-centred CDM was useful in the past, but in the digital age, increased customer expectations are often insufficiently addressed.

Expansion of the Customer Data Model: From Customer Master Data to the Management of Rich Customer Data

During the transition to the customer-centric business model, customer master data management (MDM) is evolving into the management of rich customer data. This can mean a fundamental transformation in the way insurance companies handle customer data. While customer MDM focuses on the consolidation and standardisation of master data (such as name, address or telephone number), rich customer data collects information about the life situation of customers as well as behavioural data in (quasi) real time.

The aim of MDM is to create a uniform, correct and consistent state of the master data across different systems. This is because insurers need the master data to ensure smooth management of business processes. Customer MDM focuses primarily on data that rarely or never changes (such as address or date of birth). The master data is the basis for the insurance business, and the added value is then created by the rich customer data.

The management of rich customer data not only consolidates the master data of customers, but also other data such as ongoing interactions in communication (emails, reactions to newsletters, etc.), behaviour in the customer portal or life events such as the purchase of a house. This means that they can be used for personalised customer interactions. By harmonising personal data with data on insurance policies taken out, claims, payments and complaints, the insurer can plan the next steps in its communication with customers and create forecasts of the corresponding customer reactions.

Impact of the customer-centric business model on the IT architecture

The transformation not only affects the company's orientation or data structure, but can also make changes to the IT architecture necessary.

Legacy systems often dominate in traditional architecture, which are geared towards contract data. These systems are often organised in a silo-like manner, do not allow for easy integration or effective data merging, and therefore do not provide a holistic view of the customer.

Data integration plays a crucial role in a customer-centric IT architecture. Exciting topics that are currently in high demand in the insurance industry, such as a 360-degree customer view or the predictive analysis of customer relationships, can be fully realised by building or introducing a central customer data platform and making the IT architecture more flexible. This also includes adapting existing system interfaces or developing new ones.

Customer experience professionals understand a central customer data platform (CDP) to be a system that brings together data from all relevant sources and makes it available in (near) real time. A platform can either be purchased or built on the insurer's existing systems, provided that they meet requirements such as data integration, cleansing and mapping (and others).

Many insurers see a central customer data platform in a partner system and have thus already taken a first step towards customer centricity. A good partner system can help with cleansing and centralised management of customer master data, but it cannot provide a 360-degree customer view or more advanced cross-domain analytics. Partner systems are best suited for customer master data management and therefore serve as the basis for customer data management, but they are only one piece of the puzzle for a truly customer-centric approach.

The adjustments required in the IT architecture for customer centricity can vary from insurer to insurer, depending on which tools are already in use and in what condition they are. As part of the introduction of customer-centric data management, other tools are also considered, such as CRM systems, data governance tools, BI tools or AI solutions. The aim is to develop the optimal and most efficient path to customer centricity for the respective insurer.

Conclusion

The customer-centric business model not only influences corporate culture, but also requires a new orientation in the understanding of customer data and its use. To ensure that the transition from the contract-centric model to the customer-centric model is more than superficial, the insurer should make comprehensive changes to its data management at an early stage. Companies that successfully make this change can look forward to a secure and competitive future.

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