Its time for insurance to come out of the dark ages and take advantage of code halos, the technology trail that each one of us creates around ourselves, writes Ben Pring
Actuaries have long been 'datavores', vacuuming up ever-increasing reams of information about ancestry and health and lifestyle and location to make optimal quote decisions. Technology has made an incredible contribution, helping the insatiable actuarial appetite by broadening the ability to collect and analyse relevant information and process it at speeds unimaginable even a decade ago.
Yet with all the data science strides insurers have made over recent years, consumers still appear in pretty coarse grain to them. I look exactly the same to my insurance company as my neighbour does. In fact, comparing notes, we discovered we were both paying almost exactly the same for our homeowners' insurance. Admittedly we do 'look' the same. We're both white, middle-aged, middle-class men, both making the same sort of money. Both married, with two kids. But if you knew us you'd know our profiles were wildly dissimilar. He keeps going for a couple more glasses of wine after I've admitted defeat; he sleeps in while I hit the gym. His sweating the small stuff isn't, in my humble opinion, going to end well.
He - from my perspective - is a much worse insurance risk than I am. And yet we're paying the same premium. Fair? Probably not. Understandable? I guess so; that's just the way it is. Currently.
This has been the world since insurance was invented (thanks, James Dodson) - a world in which information was scarce, hard to come by, and frequently wrong. A world in which guessing was standard operating procedure and customers segmented into broad crude 'demos', which said something about an individual, but frankly, not much. A world where I belong - as far as my insurer is concerned - in the market of middle-aged white guys.
But I'm 'me', not 'him' or 'them'. If our insurer knew us, it would make adjustments to our premiums that would make at least one of us very happy.
'Knowing' me? Impossible, right? Wrong. Increasingly, lots of companies do know me. Amazon, Netflix, Apple, know me. Pandora knows me. LinkedIn knows me. How does YouTube know the music I like to listen to?
The answer? Because it can see my 'code halo'. A 'halo' of information that swirls all around me created by every digital interaction I have.
Each one of us is creating a code halo with every click or swipe of our phone, tablet, laptop, Glass, Nest, FuelBand, dashboard or other smart device. Every transaction we make, every 'like' we record, every preference we note, creates a trail of information that composes a digital fingerprint of who we are and what makes us tick. Code halos allow switched-on companies to know us, to read our minds, to turn the sales process from something harsh into something painless and seductive, to move beyond seeing us as a part of a socio-economic demographic to seeing the 'market of me'.
Code halos are shaking up what and how things are sold. They have seen companies like Amazon and Netflix become the new titans of our digital age. They're largely responsible for the demise of companies like Blockbuster and Kodak - that didn't understand how digitisation and mass personalisation were playing out under their very noses. And now code halo thinking is spreading fast into a broader range of industries and markets where smart leaders are seeing that a new game is being played.
Google's $3.2 billion acquisition of the smart thermostat maker, Nest; Disney's $1 billion development of smart wristbands that visitors can wear at its theme parks; Monsanto's $930 million purchase of Climate Corp, a weather-data-mining company that helps farmers increase yields by 30%, are just a few recent examples of how code halos are impacting everything from design, to production, to selling, to talent management.
Some insurance providers are making similar moves. Flo's Snapshot is a great example - an on-board telematics device that allows Progressive to see their customer's driving patterns in an unprecedented way.
The code halo concept is catching on like wildfire. (If you could see the frequent flyer field in my code halo you'd see proof enough). And yet it has only really scratched the surface. Insurers - and their actuarial advisors - have work to do to really embed code halos into the way they do business. Is your organisation really thinking - deeply and broadly and at a strategic level - about questions like these?
? Do we have the right to make quote decisions based on insights about an individual's health by distilling peripheral aspects of their code halo attributes, or a family member's code halo?
? If we can see from a prospect's social media postings that she indulges in skydiving most weekends, can we act on that? Should we act on that? Do we have the right to act on it? Would it be commercially smart to do so?
? What should we do if (and presumably when) we can access data from 23andMe (the ancestral DNA testing company) to understand health destinies? If data is an asset - which in this brave new world it surely is - how should we account for it? Do customers own their data (including their metadata - their non-transactional browsing history) or do we?
Code halos allow us to see people, things and organisations in greater detail than before. Seeing, though, will not be enough alone to guarantee commercial victory. Leaders in all sorts of business - including insurance - will avail themselves of more powerful new data sources.
Code halo thinking will introduce a datavore's field day. But making meaning in a world of data abundance - more importantly, making smart business decisions - will continue to be an non-trivial undertaking. As famed business author Geoffrey Moore puts it, "before data's an asset, it's a liability".
Many fascinating and tough questions are being raised as new social, mobile, analytics and cloud (SMAC) technologies re-shape various aspects of society, business and our daily lives. Understanding code halos is key to understanding how to take advantage of the once-in-a-generation opportunities in front of you (and your competitors) today.
Building and leveraging 'markets of me' by using code halos is set to be the new competitive battlefield on which insurers will be fighting it out over the next few years. I look forward to you getting to know me through my code halo very soon. And to the mutual benefits that are sure to arise for us all.