There has been so much dynamic change in how the insuranceindustry leverages data and analytics to run their businesses.

In fact, insurers are early analytic adopters — actuarialscience has been around since the late 1700s! But for the next200-plus years, insurers continued to focus their analytic effortson perfecting actuarial assumptions so that they could take onprudent risk. The analytic conversation has traditionally alwaysbeen, "How can I underwrite this risk?" and notnecessarily "How can I help this insured?"

In the past 10 years or so, we've seen a dramatic change in boththe proliferation of available data and the customer dynamic.

Insurers are leveraging data to more profitably underwrite newrisk segments, take on new markets, and create new products. Theindustry has even made good inroads into digital servicesstrategies to better support end customers and agents in onlinechannels. But the industry hasn't pulled all these risk,underwriting and service strategies together to create a positiveexperience and strengthen our customer and distributorrelationships.

This represents a shift from our perception of what we need asan insurance company: "I can underwrite $X in this risk profile,"to "I have a customer who needs insurance, can I meet his or herneeds?" And from anticipating the value of a long-term relationshipwith a customer and anticipating what they may need in the future:"[My customer] just bought a home and is expecting their firstchild."

The unfortunate part is that pretty much every company,regardless of industry, now says they are "customer-centric." Theproblem is that few companies have a really good handle on whatthat means because customer-centricity can encompass so manycapabilities. Most simply, customer-centric companies put theircustomer at the center of their business, not their products orchannels. This means that we anticipate and understand ourcustomers' needs and respond to those needs in a way that'sconvenient to them. Customer-centric companies don't think aboutcustomers in terms of a single transaction or a unit of risk, but aseries of meaningful interactions (the customer experience) over aperiod of time.

In the insurance industry, many companies are still hampered byproduct and functional silos that inhibit understanding thiscustomer journey. Every insurer's back-end technologyinfrastructure includes a tangled web of legacy administrationsystems (and spreadsheets), and many companies have made biginvestments to modernize those systems to increase operationalefficiency. We've also seen huge investments in customerrelationship management (CRM) capabilities in the past few years,but most CRM systems are not integrated well with the otherdecision-making engines within the business, and we still end upmaking risk decisions independently from customer decisions.

Why? We're still going off of 200 years of insurance industryheritage: We often see our customers in terms of risks, policiesand transactions, not people with distinct needs or wants. Thequestion is: How do we start to think about bridging thegap between risk and customer engagement?

Next page: Three ways to bridge the gap.

(Photo: Shutterstock)

1. Align your risk tolerance with your customersegments. Break your risk tolerance down to thecustomer-segment level. Not all customers look alike, and they willrespond differently based on their needs and their channelpreferences. Many companies use rules-based segmentation techniquestoday (for example, women age 25 to 35, living in urban areas),which is a good starting point. Consider layering in predictivesegmentation to anticipate customer behavior and preferences.

As an example, one insurance company began to build predictivesegments around which customers were likely to renew theirpolicies. They uncovered several different distinct populations ofpotentially valuable customers with a high attrition risk. Theystarted to evaluate the customer journey and discovered that theyweren't having a conversation about renewal until the end of thepolicy period: After the customer had already made the decision toswitch insurers. They created a cross-channel interaction strategyfor that group of high potential customers to engage with themthroughout the lifecycle.

2. Turn your segments into personas: A personais simply a hypothetical person that embodies the attributes ofyour segment. This is a much more powerful and personal way torepresent your customers internally as you develop your strategy.It's easier for people to relate to "Jane" than "high-value,high-risk, mid-career females segment No. 10."

3. Craft your cross-functional strategy. Nowthat you're oriented to the customer point of view, start aligningyour underwriting and channel strategies. Organizationally, this isone of the most challenging aspects of the customer-centricevolution. Most companies are aligned by product or channel, eachwith their own profit targets, marketing and contact strategies.Having the tough conversations about coordinating cross-productunderwriting needs with customer personas across their lifecycle iscritical.

Being serious about customer-centricity means being seriousabout organizational transformation. You have to break down theproduct and functional silos. Reevaluate your go-to market andcustomer-servicing strategy, and refocus analytic capabilities tounderstand who your customers are and what they need.

Rachel Alt-Simmons is a principal industry consultant forfinancial services at Cary, N.C.-based business analytics softwareand services company SAS. Previously, she drove enterprise analyticcapabilities at Travelers and Hartford Life, and was researchdirector for Life and Annuity at research firm TowerGroup.