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Competitiveness Drives Use of Operational Data Analytics

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There is increasing evidence that insurers are looking to better utilize data analytics in an operational environment to improve competitiveness in current market conditions.

Insurance & Technology recently reported on a conversation with Piyush Singh, CIO of Cincinnati-based Great American Insurance Company, who believes there will be an ‘industry-wide shakeup that will be driven by continuing economic pressure from the trough — or outright disappearance — of the insurance cycle as we’ve come to know it.’ Insurance & Technology Insurance CIOs Discuss Technology Priorities for 2011.

Singh believes that operational data analytics will be a key enabler for organizations to survive this shakeup:  “Our strength will be product innovation and an enriched underwriting decision-making process,” Singh continues. ” This will be made possible by the continuous — as opposed to one-time — use of data mining to identify and cluster segments, and enabling technology that puts experience and third-party and publicly available data relevant to the decision-making process at the fingertips of underwriters.”  Insurance & Technology Insurance CIOs Discuss Technology Priorities for 2011

Karen Pauli, from Tower Group, commenting on underwriting commercial lines business in Tech Decisions in the fall of 2010, makes a similar point:  “You have to be disciplined to pull off strategies,” she says. “Analytics is the key piece right now to assess your best risks and where you have some capabilities to up the price of some coverage without blowing the customer out of the water.”  Designer Selections: Predictive Analytics in Insurance, Tech Decisions, September 10, 2010.

One concrete example of increasingly precise data gathering being used in underwriting is ‘Telematics’, frequently billed as ‘Pay as you Drive ‘.  In this, the automobile is equipped with technology to monitor use of the car, and report electronically to the insurer.  This usually means  kilometers driven, but can also include other elements such as speed, location, time, etc.  These data are then available to predictive models for use in underwriting.

There has been a growing (but so-far unsuccessful) movement in British Columbia to have this feature included in the ICBC automobile program.  See ‘Expert recommends pay-as-you-go auto insurance for B.C. drivers’. However, Anthony O’Donnell, blogging in Insurance & Technology, sees Telematics as part of the future:  “While the telematics approach wasn’t successful at first with American consumers, they now seem to be warming up to the idea. The necessary hardware has become cheaper and people are simply more comfortable with sharing information in the right way for the right reasons.” Insurer/Customer Collaboration on Underwriting? Anthony O’Donnell, Insurance&Technology November 19, 2010.

Are analytics part of your present or future?  We’d love to hear your comments.

2011 Insurance-Canada.ca Technology ConferenceUse of data analytics by insurers will be addressed by several experienced faculty at the 2011 Insurance-Canada.ca Technology Conference in Toronto on February 28, 2011.  Details and registration information can be found here.

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