- Where Insurance & Technology Meet

Analytics In P&C Insurance: Is a Good Start Good Enough?

A new report from two senior analysts at SMA suggest that P&C insurers have made a good start down the analytics road.  The question is:  will this be good enough to remain competitive given the pace of adoption by present and potential competitors?  A second report, focusing on the broader Financial Services community, puts perspective on this.

We’d like your thoughts here.

Survey says….

The research report, Data and Analytics in Insurance: P&C Insurer Strategic Priorities and Operational Plans for 2014 and Beyond, produced by Mark Breading and Denise Garth in cooperation with ACORD, compiled data from 72 North American P&C insurers.

This is the third annual report on analytics, and focused on 3 areas:

  1. The types of business problems being addressed,
  2. the spectrum of technologies being used, and
  3. data, “the fuel that powers the analytics engine.”

We find the conclusions in regards to the first area the most intriguing, especially in the current competitive environment.

Internal users win ….

SMA’s analysis concludes that heaviest current use of analytics are found supporting the following:

  1. Pricing models
  2. CAT models
  3. Financial Management
  4. Underwriting Profitability
  5. Product Profitability

The report notes that these head office areas are benefiting from  increasing availability of data sources.  Also given the still uncertain economic climate, financial management remains a top area.

The report’s authors conclude: “Growth and profitability remain key drivers for insurers, thus the focus on underwriting and product profitability. Conspicuously missing from the top 5 areas today are customer-centric analytics, although that is expected to change.”

Marketing is rising, with an interesting twist ….

Within marketing, the two top areas that are high on the planning priority list are Agent Performance (55% of respondents report this in use, or being implemented now) and New Business Analysis (42% in use/implementing).  This would suggest a focus on improving the performance of the distribution channel.

However, agents/brokers might want to note that four of the next 5 areas focus on customers specifically:  Customer segmentation, CRM, Customer Lifetime Value, and Single View of Customer, with the fifth being Channel Performance.

We see this as further evidence that the new omni-channel environment is upon us.

Bringing it all together (or not)…

An overarching message throughout the report is that as much as insurers are doing (and the spend on this is growing by 7%-12% per year for those covered by the report), the emphasis seems to be departmental, rather than corporate.

Breading and Garth comment:  “”Many insurers have been successful thus far with BI and analytics through individual initiatives in key areas of the business. That approach is no longer enough to provide the differentiating capabilities to win in the marketplace.”

The SMA Call to Action is straightforward:  “Winners will be those that establish leaders and teams with authority to drive enterprise data initiatives and enable all parts of the business to get the most out of BI/analytics technologies.”

So, is this enough?

KPMG’s April 2014 issue of  its “Frontiers in Finance” publication focused on data and its use.  There were some parallels with the state of the insurance industry portrayed by the SMA report, with a few important differences, one of which is focus on the customer.  The second is the importance of an enterprise strategy.

Jeremy Anderson, Chairman of Global Financial Services for KPMG, encapsulates both;  writing in the introduction:

Information and data management are fundamental to maintaining stable and responsive relationships with clients who are increasingly expecting continuous access to their financial service providers on a range of online and mobile platforms. Integrating the different interface technologies and grounding them on consistent, high-quality data are essential elements in creating fast, agile communications and decision-making. Consumers do not want complexity, delays or inconsistency. Companies that cannot implement the necessary systems quickly enough will find themselves squeezed out and facing further disintermediation by technical innovators, new entrants and new technologies, like we are seeing in payments or money transfer.

The publication does not provide detail on implementations or plans.  What it does do is reinforce the conclusions of the SMA call to action with a particular sense of urgency.

What do you think?

So, we’d like to toss this to you: Are insurers doing enough with data and analytics to be prepared for competition from “technical innovators, new entrants and new technologies, like we are seeing in payments or money transfer”?

Please don’t disintermediate until you leave your comment below.