Data analytics has undergone a rapid evolution over the past decade. The importance of gathering and analyzing all aspects of data has become critical to competing in today’s marketplace. For the insurance industry however, entering the data renaissance has been a slow process.
With the rise of insurtech firms, the industry is undergoing critical changes in terms of modernizing their tech stack. The institutional inertia to cling on to traditional processes and technology has greatly limited the potential growth across all levels of insurance.
One of the most obvious ways that data analytics has helped the insurance industry is by managing risk and optimizing premiums allowing for a more tailored product.
By collecting data on an individual customer’s history it is possible to discern the profitability of certain business classifications and clients, based on a variety of products. Data collected could include: claims history, location, and employee injuries, for example.
From here, carriers can further refine your product, targeting your premiums to the client, allowing for a more personalized experience, while the process remains largely automated.
As Tom Warden noted in his article for Insurance CIO Outlook, “pricing will become a more even playing field as the sophistication of algorithms and creative use of data bump up against the tolerances regulators have for innovation in this space.”
Technology and data analytics can help the efficiency of a carrier
Whether it’s learning more about your client’s product preferences or locating areas for future expansion.
From this initial return of the data, you can see where your carrier thrives, whether it’s a specific classification or other variables, and focus more of your energy and money on appealing to these pillars of your carrier.
You can also use this data to reinforce and strengthen your relationships with your partners to make your business even more effective.
This exploration can also apply the opposing direction where the data highlights problem areas of loss or inefficiency.
In general, however, insights from data analytics can help refine both your product and the efficiency of the carrier to make it more effective and appealing to potential clients.
Organizational changes can be a challenge for carriers
The slow process of monetization of data and organizational changes both pose challenges for carriers. To become a truly data-driven company, you have to invest money in technology and data management tools. These tools might not show immediate monetary benefits, but they are necessary for long term success.
Data must be viewed as a long term process, and although it may not bring in specific income, it can help transform the way you view your current business models and allow you to expand your client base.