Data as a strategic asset
Within Europe and in several other countries, Insurers have already started business models in which data is the beating heart. Data are the core asset to leverage on to create value for the company: Insurers are using data as enabler to achieve their strategic goals. In fact, in the recent past, the western European insurance market is lighted by the first application of some Data Monetization Business models even some still pioneering ones.
Insurance Companies, while defining strategies and business models with data as a core asset, are inspired by three macro-trends:
Increase in the value of the global data market: $15.4 BLN$ represents the expected value of the global Data Monetization market in 2030 (CAGR increase of 22.1% from 2021 to 2030).
Growth in the volume of digital data generated globally: it is estimated that, to date, there are 2.5 quintillion bytes of digital data generated daily in the world; however, this trend is increasing.
Consumer openness to share their personal data: 69% of customers declared they are willing to share their personal data for a lower insurance premium or services tailored to their needs.
How can Insurance Companies exploit data?
Given the international market conditions, resulting in an increasing availability of digital data and an increasing openness of retail customers to share their data for monetary and non-monetary benefits, companies are evolving their business and operational models along two main lines to monetise data:
Internal Monetization, exploiting data internally to increase value along the entire value-chain in order to:
Make processes more efficient, by analysing operational processes to improve their efficiency and effectiveness (e.g. automated claims management, sales network optimisation, etc.).
Improve the offer, managing the entire life cycle of the insurance and beyond- insurance products with a customer-centric approach (e.g. improvement and optimisation of the product catalogue through automatic customer-base segmentation activities, marketing actions based on specific events, suggesting next best actions, etc.).
External Monetization, i.e., giving and/or selling the data externally, through:
Data Sales, i.e., the sale of data to B2B partners.
Data Exchange, the exchange of data with other B2B players typically belonging to different industries.
Analytics-as-a-Service, the provision of analytics services to other B2B actors.
Of all the Monetization modes mentioned, external Monetization is becoming particularly attractive to companies, which are building ad-hoc models to exploit the related opportunities.
External Data Monetization: Data Orchestration at the Heart of Insurance Companies' Business Models
Global market evidence shows that the main players in the Insurance Industry have already launched business and operational models enabling external monetization, focusing on Data Sales.
With reference to Data Sales, given the turnover and the level of disruption, there are two ways, at the opposite, to sell data externally:
Plain Vanilla Data Sales, which involves selling anonymised and aggregated data to B2B third-parties.
Data Sales Orchestration, which involves the creation of a Data Monetization Ecosystem in which retail customers interact with B2B partners to exchange data and purchase goods and services.
Particularly, Data Sales Orchestration envisages creating a Data Monetization Ecosystem managed by the Insurance Company, which configures as the main role of the orchestrator. In detail, the Insurance Company provides a data broker platform, enabling the exchange of data between retail customers and B2B partners, and a marketplace for exchanging goods and services. Retail customers, in exchange for data transfer, receive rewards (e.g. coins) spendable into the market to purchase goods and services.
The 5 main reasons why Insurance Companies should have a Data Monetization Ecosystem
The Data Sales Orchestration and linked Ecosystem allow companies to converge external and internal Data Monetization opportunities into a single point of consistency: the Insurance Company, as an orchestrator, on the other one hand, increases the pieces of information available, resulting in a more enriched customer profile and, on the other hand, increases revenues through the collection of fees generated by the exchange of data and goods/services.
Among others, the main reasons why Insurance Companies are developing Data Monetization Ecosystems include:
Turnover: new revenues generated from fees linked to the sale of data through the data broker platform and goods and services through the marketplace.
Customer 360° profile 2.0: thanks to the data collected within the Data Monetization Ecosystem, the Insurance Company can leverage a more accurate customer profile and increase the related Customer Experience and Engagement.
Health & Mobility Ecosystem: through the data made available by its customers, the Insurance Company can suggest responsible and virtuous behaviours that, on the one hand, reduce the risk of damage/compensation and, on the other hand, bring value to the customer.
ESG Ecosystem: the implementation of a Data Monetization Ecosystem allows, on the one hand, Insurance Companies to grant rewards (e.g. green coins) to their customers who adopt sustainable behaviours and, on the other hand, having customer data available, suggest sustainable behaviours. This might end up into a stronger brand awareness for the Company.
Stay ahead of the game: the insurance market globally is threatened by new entrants that leverage the data at their disposal to offer insurance products. It is, therefore, essential to have the assets and capabilities to manage insurance companies' data assets effectively.
Strategic asset: having an asset enabling the development of both core and non-core insurance ecosystems.
Other further business innovations: the Data Monetization Ecosystem can be linked to further innovations entering the market, such as NFTs. The rewards earned by retail clients from the exchange of NFTs can be spent within the Data Monetization Ecosystem, thus generating a virtuous circle.
Therefore, Data Monetization Ecosystem is considered an essential asset for the development of the insurance core business and beyond insurance, which companies cannot avoid if they want to keep pace with a constantly evolving market.