With more business people traveling to less developed and unstable regions of the world, the number of kidnappings of foreign nationals has increased dramatically. Between 2011 and 2012 (the most recent data available), abductions of foreign nationals increased nearly 100%. Further, two people are kidnapped for ransom every hour, resulting in $1.5 billion paid annually to kidnappers. An estimated 80% of cases go unreported because they are not made public.
Enter kidnapping and ransom reimbursement (K&R) insurers, whose policies protect the business interests of international companies by reimbursing the ransom paid for a kidnapped employee. Studies have shown that the risk of kidnapping death is reduced by 89% when victims are insured. With 12% annual market growth, to an estimated $8 billion this year, we see the K&R market as an under-penetrated one that is deserving of attention from insurers.
Several factors, however, are blocking K&R opportunities. For one, incomplete historical data on such incidents makes it difficult for insurers to develop a statistically accurate approach to establishing rates, which results in high premiums. Further, K&R insurers face limited prospecting, underwriting and loss control measures. Because conventional methods have proved ineffective for resolving these issues, we believe a new approach — involving the harnessing of the digital data that surrounds people, places, organizations and devices (what we call Code Halo thinking) — can enable insurers to overcome these barriers and even reduce the number of incidents.
Consider the information generated by a typical traveler. Let’s say “John,” who works as a sales executive at a multinational biochemical company, needs to make travel plans for an upcoming conference in Mexico City. He logs onto Expedia, books his travel arrangements and schedules meetings with his clients on his smartphone. In the evening, he makes his plans public on Twitter and elsewhere online to see if any of his colleagues will be in the area.
Once John lands in Mexico City, he continues to “check-in” online, uses GPS to get around and even books a weekend getaway in Acapulco on TripAdvisor. In this situation, John has triggered, proliferated and reacted to numerous digital interactions that can be used for or even against him. Using Code Halo thinking, insurers can build data stores in which this metadata is analyzed to assess and mitigate risk.
Creating the Ecosystem
To get started with such an initiative, insurers should understand two main aspects of the Code Halo ecosystem: the data sources that populate the Code Halo (see Figure 1) and the components involved in implementing it.
To implement the solution, we recommend following these steps:
Through mobile apps and wearable devices, insurers can better understand the risk level of the insured’s potential and actual locations, communicate safe travel zones and routes, and share safety alerts. A suite of applications can be developed to integrate all data sources and perform the necessary collation, cleansing and correlation of information gathered.
Prepare and assimilate
Application layers are required to prepare and assimilate the gathered data to enable valuable insights, including a compliance rules engine, and data analysis and decision support algorithms.
To benefit from the insights developed about customers and prospects, insurers need to invest in a rating algorithm and update their marketing/sales systems and customer communication systems.
To capitalize on K&R market opportunities, insurers need to rethink and rewire their IT infrastructure. Among the key questions they most resolve, are: How will the desired insights be delivered? Will mobile apps, wearables and/or other data gathering applications be used? How will the captured data be prepared, assimilated and analyzed? Which compliance rules, decision engines and rating algorithms will be followed to prioritize risk, pursue new leads and issue safety warnings?
We believe Code Halo thinking — powered by social, mobile, analytics and cloud technologies (aka the SMAC Stack) — will enable K&R insurers to not only answer those important questions, but ultimately succeed in a growing, and life-saving, industry.