“All for one and one for all” is best known as the motto from “The Three Musketeers”, but this phrase could easily sum up the growing trend in social brokers.
With advanced analytical techniques like generalized linear modeling insurance companies have created more granular pricing structures. But despite the assertions of “customer segmentation of one” or individualized pricing most insurance company continue to aggregate risk. If an individual then falls outside those defined policy limits or has pre-existing conditions the insurance company often declines the coverage. For example, an insurance company may not offer coverage if your property has a thatched-roof or travel insurance if an individual has an existing heart condition.
Social brokers are a new type of online intermediaries that helps individual overcome these challenges. It works by these brokers using internet search and social media to identify segments with poorly-served insurance requirements or groups of customers with similar needs then negotiates insurance on behalf of the group.
Social brokers are seen as a win-win for both customers and insurance companies.
Customers that use social brokers can experience substantial savings. The market leading social broker Bought by Many (BBM) claims that its customers save, on average, 19 percent by using its collective buying powers.
Social brokers allow insurers to diversify its product portfolio by enabling them to write business in sufficient quantities it previously would have declined. The more diversified an insurer’s book of business then the less capital it needs to hold to comply with regulations like Solvency II. In today’s financial environment this is of considerable benefits to insurance companies. Also, research shows retention rates for policies written with social brokers is higher than with traditional distribution channels. Another benefit for insurance companies.
For an industry that is often seen as laggards and risk-adverse. Social broking is a great example of how insurance companies of all shapes and sizes are finding innovative ways to use data to increase revenue. To learn more about how analytics can help insurance marketing departments focus on customers, download the white paper “Customer Intelligence in the era of Data-driven marketing”.
I’m Stuart Rose, Director, Global Insurance Practice at SAS. For further discussions, connect with me on LinkedIn and Twitter.
