March 28, 2014
Six Key Insurance Business Impacts From Analytics
The future of analytics is even more promising than most can imagine -- it is already igniting innovation and change at carriers.
Recently, I had the privilege of serving as chairman of the inaugural Insurance for Analytics USA conference in Chicago, which was very well organized by Data Driven Business, part of FC Business Intelligence. I am convinced that analytics is not only one of the most valuable and promising technology disciplines to ever find its way into the insurance industry ecosystem, but that its very adoption clearly identifies those carriers – and their information technology partners – that will be the most innovative.
Analytics has exceptionally broad enterprise potential, with the ability to permanently change the way carriers think and conduct their business. The future of analytics is even more promising than most can imagine.
The conference — where the excitement was palpable — showed the sheer diversity of carrier types and sizes as well as the many different operational areas in which analytics is being used to drive insight, business outcomes and innovation and create real competitive differentiation. From large carriers such as Chubb, Sun Life, Nationwide, American Family, CNA and CSAA, to smaller insurers including Fireman's Fund, Pacific Specialty, Great American, Westfield, National General and Houston Casualty, presentations demonstrated how broadly analytics should be applied through every function and every level of the organization. Presentations from information technology provider types including Dun & Bradstreet, L&T InfoTech, Fractal Analytics, Megaputer, EagleEye Analytics, Clarity Solutions Group, Dataguise, Quadrant, Actionable Analytics, Earley & Associates and DataDNA laid out the future potential.
Recent research shows that one major application of analytics — predictive modeling — is getting attention in pricing and rating, where more than 80% of carriers use it regularly. However, only about 50% use it today in underwriting, and fewer than 30% do so in reserving, claims and marketing.
Based on information shared during the conference, there are six major thrusts to the analytics trend:
• Analytics liberates and democratizes data, which in turn ignites innovation and change within carriers.
• Analytics is uniting insurance organizations, breaking down information silos and creating collaboration between operating units, even as enterprise data governance policies and practices emerge.
• Investment and M&A activity in information technology companies in data and analytics is surging and will create even greater disruption and innovation as more entrepreneurial thinkers continue blending art with science.
• New “as-a-service” pay-per-use models for delivery and pricing are emerging for software (SaaS) and data (DaaS), which will be appealing and cost-effective, especially for mid-tier and smaller carriers.
• Analytics is driving innovation in products, business processes, markets, competition and business models.
• Carriers will have to innovate or surrender market share and should watch for competition from new players, such as Google and Amazon, which understand data, the cloud, innovation and consumer engagement.
This article first appeared on Insurance & Technology