Analytics Will Address Many of Insurers’ Greatest Challenges and Opportunities

If done correctly and with the right technology, modernizing databases and data warehouses and applying analytics can improve business outcomes and allow carriers to provide customers with the customized service they crave.

(Photo credit: Evan-Amos.)

Today, insurance companies are facing increasing uncertainty as the industry rapidly changes. New regulations, a millennial customer base, upstart technology-driven competition, customer churn and the speed needed to deliver innovation, all end with the same solution: predictive analytics.

Insurance companies must rethink how their core systems interact with and drive the effective use of data. Carriers have significant internal data, but the industry has been unable in most cases to use the data to its fullest extent for many reasons, including the fact that new capabilities can come with heavy upfront cost. According to Gen Re 46 percent of insurance companies have no immediate plans to use predictive analytics in their business in the next two years. However, by ignoring the inherent value in their own data, companies are missing opportunities to better service customers and improve their bottom line.

Insurers must reassess the playing field

Insurers can reassess their work across the value chain including the life and annuities, property and casualty, and reinsurance and large commercial segments.

For instance, the intensity and uncertainty of natural and manufactured catastrophes create unprecedented opportunities and risks for the underwriting market, and insurers need to find a solution to assess the susceptibility of underwriting portfolios to various catastrophic events. In these instances, insurance companies can gain a competitive advantage in their segment by leveraging the latest technologies, including predictive analytics.

The property/casualty insurance sector has been leading the digital transformation across various geographies. Increased competition, evolving distribution channels, the rapid adoption of service digitalization, and evolving customer expectations call for greater responsiveness. Insurance companies can use predictive analytics to create agile and streamlined service offerings to meet current business challenges.

Insurers of all sizes must also streamline operations to enhance omnichannel customer-facing and channel partner experiences, as the internet of things (IoT), autonomous vehicles, connected homes and telematics technologies evolve. Today, companies are creating new customer touchpoints, as well as new product, and risk prevention and data collection capabilities—all of which require new pricing and risk models.

How can companies rise to the top?

Insurers can modernize legacy systems, leverage digital legacy integration services, and reengineer business processes to enhance business agility, reduce costs, and improve margins, thus injecting new efficiencies into their systems. This will inevitably help them monetize new channels, and prepare them for changing business imperatives.

Is this a large investment? Yes. But it’s important to see how far the industry has come. Imagine a customer looking for home insurance. They can enter a postal code and home address onto a website and receive an instant quote on the cost of their insurance. The consumer can start this process on a mobile device, finish on a laptop, and then verify coverage via a phone call – a seamless process driven by the customer’s preference.  As an insurer, there are now numerous ways data can be used to help this person: For example, patterns of his/her insurance claims that occur in that area (e.g., flood, tornado, hurricane, etc.). The insurance company can now tailor a customer’s quote request to include the likelihood of a common event in their area, the average cost of a claim for that event and then the price for insurance for that coverage.

Potential setbacks

The insurance business thrives on reliability and trust, so it is critical to ensure that customer information is safe from any kind of theft, leak or destruction. The integrity, confidentiality and availability of Electronic Protected Health Information (EPHI) that an organization gathers, maintains, or transmits, must be protected from any untoward incidents at all costs. Insurance companies control confidential customer data such as medical records, social security numbers, financial information, and driving records. The privacy of this information can be breached not only by inappropriate access to stored information, but also through electronic transmission.

Therefore, the most important component is treating customer data with the utmost care. This approach establishes trust, laying the foundation for long-term engagement and, ultimately, more profitable customer relationships. Businesses should use customer data to create better, personalized brand experiences, rather than just retargeting, or regurgitating information—which can come across as unsettling and intrusive.

What does the future hold for insurance companies?

The use of data, data analytics, and omnichannel user experience is still an evolving practice, but one that can seriously change the way that insurance carriers and brokers operate.

Insurers will begin adopting a new way of managing customer and business information to lead the charge in innovation. Data will now be analyzed to reliably predict what will happen next. For instance, insurance companies will attract new customers and qualify these leads with specifically tailored solutions, thereby reducing sunk costs from leads who realize a solution isn’t quite for them.

Predictive analytics will require companies to reevaluate their current state technology capabilities to see whether they are moving forward. If done correctly and with the right technology, modernizing databases and data warehouses and applying analytics can improve business outcomes and allow carriers to provide customers with the customized service they crave.

Jon Mayo // Jon Mayo is Vice President and Business Development Head at NIIT Technologies, a global insurance solutions organization. With decades of insurance industry experience, he has deep domain expertise and is focusing on developing approaches to enhance the customer experience.

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