What is the next data frontier for P&C insurance?
The insurance industry has always been one of the original data-driven industries and has been a pioneer in the field of big data for decades. Data-mining intelligence was used to assess and predict risk, while printed actuarial tables determined the likelihood of loss. We relied upon our innovative approach to using data, and it helped evolve the industry we see today. Although the amount of data available to insurers was vast, insurers have not been able to fully capitalize on it for competitive advantage.
Now we have access to volumes of unique data in real time. It’s readily available and we are no longer constrained by the limitations of manual processes and legacy systems. Yet, even with all the innovation in data intelligence, only 18% of insurers are able to optimize data for competitive advantage. That’s alarming when you reflect on the fact our industry pioneered the use of data intelligence for more than 100 years. What happened? It’s 2024 and right in reach for insurance industry leaders lies an opportunity to turn data into solutions to the industry’s profitability problems. Still there are holdouts on implementing these data innovations.
Innovations in technology are enabling insurance carriers to gain a predictive view into the levels of risk of any given customer so carriers can adapt how they serve those customers with more personalization and customization to the needs of the policyholder. It’s predictive technology that has the ability to relieve the many uncertainties the industry faces, as carriers can more specifically use predictive data to understand their customers with precision and to act on these insights. This is truly a game-changer for the insurance industry.
What predictive intelligence means to insurance
What can carriers do with this new technology?
● Identify the different customer journeys to operate much more efficiently and more fairly, because they can now evaluate every unique customer by consistent measures rather than gut instinct.
● Use predictions to design a process that is much more customer-friendly and achieves their ultimate business goal – to understand as early as possible the true nature of every risk.
● They will understand if every customer in their portfolio has an adequate and accurate rate, and then identify what the entire customer path looks like, particularly in the digital flow. This predictive insight translates into non-digital flows as well.
● Use sophisticated technology that enables them to analyze unprecedented amounts of data and achieve insights like never seen before because of the capabilities of AI’s machine learning and deep learning. The amount of data a carrier can now evaluate exceeds what existed before, as AI-powered tools have the capability to learn from data and actually predict propensities in frequency, severity, and the costs associated to an individual’s threshold for risk to the carrier.
● Move beyond the restrictions of analyzing historical claims data and credit of any given individual, and now develop predictions into the future with incredible accuracy.
● Utilize predictive insights that are dedicated to supporting predictions on customer renewal and retention, and to use that information to identify target segments for outreach and retention efforts.
These capabilities are what robust data science teams have been building to support an insurance carrier’s ability to better predict and act on risk. Unfortunately, though, not every carrier has massive data science teams nor the ability to house or analyze the volumes of data required to make these predictions.
But insurance carriers don’t need to take the burden of innovation onto their shoulders anymore. Carriers have the opportunity to partner with companies who are boosting their own capabilities with new technologies. And considering the “build vs. buy” decision, there’s benefit to partnering with third parties who are several steps ahead of the industry in the area of AI risk management with the appropriate control measures in place for bias to ensure fairness.
Ultimately, it is the insurance carriers who take advantage of this new technology who will have a competitive advantage over those who do not, and these are the players who will be equipped with the actionable tools to augment profitable growth.
