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The Importance of Data Ethics in Insurance

4 minutes, 38 seconds read

In a world where digitization is rapidly making its way into our everyday life, challenges come as an add on package. Amongst many others, Data and Privacy are the most raised concerns. Be it any sector, consumers need assurance that their data is safe with the company. Insurance is one of the sectors that banks highly sensitive data of its customers. Data breaches, wrongful processing of customer data, using the personal information of customers without consent, etc. puts a dent in the company’s image. We have seen the scandal caused by the data breach at Facebook. 

In September 2018, Facebook announced that an attack on its computer network exposed the personal data of over 50 million users. According to Facebook, hackers were able to gain access to the system by exploiting a vulnerability in the code used for the ‘View as’ feature. The attackers stole the ‘access tokens’, which took over the user’s accounts and got access to other services. 

The need for data protection in Insurance

‘Trust’ is an essential part of the Insurance industry, failure of which can lead to loss of customer loyalty and subsequently loss of business. Insurance companies need to process customer data for calculating premiums, customized policies, claims, etc. 

In India, The Information Technology Act, 2000 (IT Act) and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 (SPDI Rules) set out the general framework for data protection. However, given the nature of the Insurance business and intermediaries, the Insurance Regulatory and Development Authority of India (IRDAI) has prescribed an additional framework for the protection of policyholder information and data, which Insurers need to follow in addition to the general framework under the IT Act. 

As India moves towards digitization, the IRDAI and IT Act are not enough to ensure proper compliance of data. The nation needs a comprehensive Data Protection law along with a governing body to oversee the implementation of the law. A draft of the Data Protection Bill was introduced in July 2018 which later was tabled on 11th December 2019 by the Indian Parliament. However, the Bill is being analyzed by a Joint Parliamentary Committee (JPC) in consultation with various groups. Indeed a groundbreaking step for our country, but it might have dangerous implications. The bill gives power to the government to access customers’ private data or government agency data on grounds of sovereignty or public order. 

The question is that will the government adhere to data ethics while processing this private data? The answer is unknown, but this step puts Insurance companies and TPAs under pressure to take steps towards data protection.

How can Insurers ensure data ethics

To ensure the privacy of customers and use data effectively, Insurers and intermediaries can adhere to the following measures-

Implementing risk management and IT security policies

Insurance is the most targeted industry by hackers. Also, with a lot of mobile workforce handling portable devices, monitoring data can be challenging. Companies need to protect data on the endpoint. The software should be installed on the systems directly and encrypting the data on portable devices such as USBs and hard drives. Growing risks in cybersecurity increased demand for Cyber Insurance policies. Cyber Insurance products are another such medium which helps in mitigating risks in the event of a cyber attack or a breach. 

According to a report by Data Security Council of India on Cyber Insurance in India, the Cyber Global Insurance market is prone to grow from a CAGR of 27% from 4.2 Bn to 22.8 Bn from 2017 to 2024. Insurers can also take measures such as setting-up internal policies and regular audits to keep a check on the data compliance. 

Consent mechanism for using policy holder’s data

A company might need data for internal purposes such as upgrading services for its customers. In such cases, companies should mention the purpose and set-up a proper mechanism for taking consent. Insurers can also give a status update on the project for which they used the customer data to keep the trust factor intact.

Using data-centric technologies

Human errors are unavoidable. But a second step validation can be set-up using disruptive technologies such as quantum computing, blockchain, Artificial Intelligence. These technologies not only ensure data security but also help in utilizing the customer data most efficiently.

[Related: 5 Proven Strategies to Break Through the Data Silos]

Ensuring transparency with customers.

In the event of a data breach, the company must inform the customers and take steps to contain the damage. In 2014, Anthem Healthcare was attacked which led to a data breach. They immediately sent out alerts to their customers informing of the possibility of their data leak. Subsequently, they also informed the media after 8 days. Furthermore, they contacted the FBI regarding the attack and hired Mandiant, a cybersecurity firm to assess the level of damage. As an essential part of data ethics, it is equally important to own the mistake and take appropriate measures.

[Related: AI in Insurance: Takeaways from AI for Data-driven Insurers Webinar]

Merits of the case: data ethics in Insurance

Data breaches can occur due to superficial monitoring of data flow; lack of accurate privacy design; poor internal audits; failure in conducting resistance tests; use of outdated security systems. 

The present crisis of COVID-19 has made data all the more vulnerable. As many employees are working from home, data security compliance has been an issue. Data protection bills and authority can act as watchdogs in the Insurance sector to avoid breaches. The Insurance sector should not see the law as a burden for additional compliance but rather an opportunity for long term customer trust. 

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[Interview] Mr. Alex Jimenez | Digital Customer Experience in Covid-19 Times

7 minutes read

The COVID-19 pandemic has brought upon an unprecedented change in our daily lives and routines. Consumer behavior is changing constantly. Lockdowns and social distancing have led to huge losses for businesses across industries. The world is heading towards an economic slowdown. Under these circumstances, organizations are facing many challenges to keep their businesses going. Insurers too are facing similar issues. Some insurance lines such as motor, travel, home have suffered a business loss due to low demand.

To understand the impact of this crisis, especially in the USA, we interviewed Mr. Alex Jiminez, Strategy Officer at Extractable from California, and learned more about creating better digital customer experiences in these testing times. 

Extractable is a strategic consulting, design, and data analytics agency focused on the future of financial services. His other recent experience includes leading technology strategic planning for the office of the CIO, at Zions Bancorporation, and managing Digital Banking and Payments Strategy and Innovation at Rockland Trust. Alex has been named to several industry influencer lists in the areas of FinTech, RegTech, Blockchain, InsurTech, Innovation, and Digital Marketing. He has been featured in the Irish Tech News and the Independent Community Bankers of America’s (ICBA) Independent Banker.

Connect with Mr. Alex Jimenez – LinkedIn

The excerpt from the interview:

The impact of COVID-19 pandemic in the financial services industry

What is the impact of COVID-19 pandemic in the financial services industry, and how is the industry responding to the ongoing crisis in the US?

In the wake of the current crisis, organizations are more focused on keeping the operation going, trying to set-up work stations for remote working, dealing with customers and working with them over digital platforms. But very few are focusing on the future which is preparing for the after-effects of this pandemic on the economy. 

In-person communication is still an important mode of interaction with customers in the US banking sector. But now the issue is how to provide good services to clients? Some of our customers are going to experience digital models for the first time. 

Organizations that have well-defined Digital Strategies and Customer-First approach will be able to provide good support to their customers. Organizations that are late into this space are more likely to face problems in the future.

[Related: The Impact of Covid-19 on the Global Economy and Insurance]

Changing customer preferences

How can companies reach out to their customers in this New Normal world?

We have already started to move towards a digital-centric world which is just going to accelerate. We will see businesses who have earlier ignored their digital capabilities will now build more on them. 

The first video call was invented in the 60s and was not so appreciated as everybody thought it was expensive and complicated. Today we have FaceTime, Zoom but adoption has not happened on a larger scale. But this will soon accelerate. Customers will be comfortable dialing into a video chat with their Insurance agent. 

I don’t believe there’ll be a New Normal. For example, in the US after 9/11 people thought that life will never get back to normal but except for rigorous security screening at the airports, there hasn’t been much change in the behavior. 

In Israel, amidst all the constant disturbance, people in Tel Aviv and Jerusalem are living normal lives. There’ll certainly be some specific changes post the pandemic such as more adoption of digital technologies, more focus on customer needs but I believe there won’t be an entirely new world with a drastic change in consumer behavior.  

The need for personalization

What are some Attention hacking lessons for Insurers operating in ‘the New Normal’?

We are moving towards the personalization of products in general. Generally in Life Insurance, we insure people based on their date of birth or medical history. But what if we insure people based on their behavior? If we did that, would people change their more risky behavior to get a better rate? A non-smoker can be given a better rate as opposed to a smoker. If we get down to individuality, saying that this is your individual (your own) rate; it makes a difference. 

There is a lot of data available and AI is needed to mine that data and derive analytics. Just by building a relationship with customers, we are not doing a great job with personalization. It’s important to apply a human touch to the communication which makes customers feel like you know them. Thus, retaining their attention.

Digital customer experience in Insurance

For the insurance industry, what steps can help in delivering the right digital customer experience in terms of UX and visual design?

A lot of organizations practice Design Thinking but Financial Services don’t. They are of the opinion that they know what is needed as they themselves are customers and they have data from the surveys. But that’s a wrong approach. Design Thinking is about empathy. It is important to get into the shoes of your clients to design better solutions.

To enhance digital customer experience, Insurers need a thorough understanding of users — who are the ultimate clients, their needs, what they expect from this experience, etc. After comprehending how they engage with technology and financial services, start venturing into the solution and test the solutions with actual users.

Innovations in the financial services industry

What technology-based innovations are being explored within the financial services industry? And, do you see AI playing a role in the short term? 

AI has already affected Financial Services in a positive way and will make it better. In insurance, IoT has been very impactful and will continue to be. Some applications have already been applied in reality like sensors in cars to detect speed and ensure that you are under the speed limit. This helps in getting reduced premiums. 

However, some basic processes are still done in the old school way of shuffling papers. Straight though-out processes have not yet happened. Now RPA is being applied to this but it is more like a band-aid. What is more important is how we can build processes through true automation with AI.

[Related: 5 Insurance Front Office Operations AI Can Improve]

Adoption of AI in Insurance

Speaking about more adoption of technologies, do you think there’ll be more investment in AI now?

Absolutely! We have already seen that investment in technologies like AI, cloud computing, quantum computing has been ramping up. Businesses will invest much more in AI than before. It might be for better decision making, underwriting, understanding the behavior of clients, etc. Also, from a marketing standpoint, financial services have never focused much before but will now invest in AI for this area too.

[Related: How is AI extending customer support during COVID-19 pandemic]

In your recent article in Extractable – “Deploying third-party financial service technology to mitigate crisis” you talk about what tech vendors are doing wrong. Please expand on how to encourage resources to be innovative change agents?

There were two points that I made in the article-

First is about what companies are doing incorrectly when it comes to innovation. Risk management is consulted only after developing the product. The product release is stalled until the legal compliances are adhered to. Instead, companies should involve the risk management at the beginning of the process (while defining the problem and solution). Involving risk management at every step of the innovation process will make it much easier to push out innovation.

The second was about vendor management. Many small vendors such as tech vendors, InsurTechs want to sell solutions to financial service companies but are often surprised by the tedious vendor management process. There’s a lot of documentation. Once the first process of selling is done, vendors should package the documentation in a way that when the next prospect asks for it, the due diligence package is ready to offer. 

Read article – Deploying third-party financial service technology to mitigate crisis 

Wrapping up

Alex shared interesting insights on how Design Thinking and Visual Design can create better digital customer experience. The design vertical at Mantra Labs too believes in the same and has designed UX for various applications for its customers. Here’s an article to understand the role of Customer Experience (CX) and User Experience (UX): Creating Amazing Digital Customer Experiences

[Also read: [Interview] Mr. Andrew Warburton | The New Normal in Insurance]

AI is going to be essential for Insurers to gain that competitive edge in the post-pandemic world. Check out Hitee — an Insurance specific chatbot for driving customer engagement. For your specific requirements, please feel free to write to us at hello@mantralabsglobal.com. 

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