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February 13, 2020

New Analytics for Small Commercial

Summary:

Major improvements in analytics and automation have been demonstrated in three areas for the small commercial market.

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Analytics can be a great equalizer in every industry. It’s why 90% of respondents to a McKinsey survey call their analytics investment “medium to high” and another 30% referred to the investment as “very significant” proof that the surveyed understand the value that analytics possesses.

Those investors—especially the commercial insurers—understand the value of analytics and get their money’s worth. In addition to improving sales targets and reducing churn, analytics can increase profitability when it comes to underwriting and selecting risk.

Still, the full potential of analytics goes beyond the insights it provides insurers. When merged with modern technology, data and analytics can fuel efficiency, accuracy and productivity. When used within the decision engine to drive automation, for example, data and analytics can help insurers expedite processes and improve customer experiences, even without human intervention.

Automated reports and actions provide insurers new ways to optimize their day-to-day operations. However, the marriage of automation and analytics is especially vital for the small commercial market as they contend with higher volumes of policy quoting and writing. Using predictive models, automation can reduce the amount of human effort it takes to sell and service policies for small businesses.

Analytics and automation present opportunities to optimize every facet of growing market share for small commercial insurers if properly applied. The sooner that insurers embrace the two, the better off they—and their customers—will be.

Analytics and Automation Can Deliver

When it comes to risk assessment for small businesses, insurers are usually hampered with limited or even misleading information. Unfortunately, this can result in a gap between a risk-appropriate rate and the quoted premium. Thanks to automation and analytics, however, that sort of disparity can be a thing of the past.

See also: What Predictive Analytics Is Reshaping  

While there are many ways analytics and automation can be used to improve the small commercial insurance industry, there are three particular areas where major improvements have been demonstrated. For insurers that are on the fence about committing to analytics and automation, here’s where their influences will likely be most visible:

1. Simplified Applications

By automating customer quoting and underwriting, insurers can phase out the process of collecting troves of information on an application. With reliable third-party data sources, automation can fill in many of the blanks present on typical applications. Insurers will then only need to ask for what’s relevant for the predictive model to assess the risk and provide direction on pricing.

In the same vein, the automation of processes and decisions empowers insurers to use straight-through processing for new applications—quoting and binding policies entirely through an e-commerce experience, without involving staff or consuming staff time. Typically, this is a far more streamlined process for both the insured and insurer, and delivers improved customer experiences.

2. Expedited Claims Processing

Small businesses are acutely sensitive to how long it takes insurers to pay claims and how good (or bad) their experiences are. Analytics helps insurers triage claims while suggesting different processing options.

According to a LexisNexis study, the availability of this data helps shorten processing cycle times by up to 15%. For example, through IoT (internet of things) devices, an insurer can detect water heater leaks and other high-risk problems in real time, enabling the insurer to anticipate potential claims and possibly even prevent them.

Of course, being fast is only part of the equation—the process must also be accurate. Thankfully, automation and analytics improve processes by catching overlooked data points. When sophisticated analytics are applied against a large sample of detailed claims data, the resulting insights can, for example, highlight the best way to get an injured employee back on his or her feet and offer a customized plan to do so.

See also: What’s Beyond Robotic Process Automation  

3. Improved Risk Identification

By using reliable third-party data, such as information available through a data consortium, insurers can more quickly and accurately identify risk—even if it’s in a sector where they have little or no experience—and ensure that risk-appropriate pricing is quoted. Analytics thus becomes a valuable growth engine for insurers to confidently expand into different business lines and regions.  In an environment where 40% of the smallest organizations have no business insurance whatsoever, insurers that embrace modern technology could reap significant rewards. By combining analytics with automation, the small business insurance market could be transformed—which would be welcome news for both insurers and their customers.

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About the Author

Kirstin Marr is the executive vice president of data solutions at Insurity, a leading provider of cloud-based solutions and data analytics for the world’s largest insurers, brokers and MGAs.

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