While not new to the insurance industry, the proliferation of digital technologies and the increasing availability of structured and unstructured data has exponentially increased the use cases for data and analytics.
Today, these include new forms of risk analysis, which are driving revenue growth, reducing fraud, and increasing operational efficiencies.
Data-driven decision-making helps not only underwriters, but also agents, brokers, and MGAs to grow into new markets while boosting profitability. Here are some of the most compelling ways insurance firms throughout the value chain are using data and analytics:
1. More accurate risk assessment and underwriting
Ever since the industry’s origins in the 1600s, underwriters have used the available data to analyse and predict the likelihood of certain events. Back then it was the odds of merchant ships arriving back in Europe loaded with tradable goods.
In the centuries since, data usage has transformed to incorporate almost every type of risk, including those that are new or rapidly evolving, such as natural catastrophe and cyber security. Fast-moving risks like this require huge volumes of data and the ability to collect and analyse them in as close to real time as possible.
MGAs are increasingly combining specialist market knowledge with sophisticated risk models to underwrite new business more profitably than many carriers can. Brokers and agents are also benefiting from the ability to sell a wider range of more specialist products into new markets, worldwide.
2. Driving business growth
We have seen how MGAs are able to use their specialist knowledge to drive business growth by winning capacity from carriers in new emerging or fast-moving risk types, such as cyber and niche SME business. The same is true across the value chain, where those insurance firms with access to more data – and the ability to analyse it – can either win business from their competitors or else carve out new, under-served markets.
Many brokers and agents are using data and analytics to improve customer retention through relevant cross-selling and identifying better value products for clients at renewal. Those insurance firms with cloud-native insurance platforms are also better able to segment their customers and tailor their offerings and marketing messaging.
Many InsurTechs and tech-savvy carriers are also analysing customer data to devise more appealing and appropriate products for specific customer segments. Embedded insurance is another way carriers can meet their customers at the point of sale by offering insurance products through new channels or by bundling it in a product experience.The London market is seeing a lot of this sort of innovation in the commercial space, while carriers in emerging markets are developing new products for small businesses and communities who have lacked competitive tailored coverage up to now.
3. Improving claims ratios
With escalating claims inflation, reducing claims where possible is sure to be as important as ever. Many carriers are increasingly using sophisticated data analysis to spot fraudulent claims, eliminate higher risk customers from their books, and process genuine claims faster and more efficiently. Some are even going one step further by leveraging IoT or wearables to collect even more data to better drive their decisions. All of this is leading to lower claims costs and improved ratios. MGAs’ sophisticated underwriting models are also in many cases leading to better claims ratios.
4. Optimizing operations
Another way many insurance firms across the value chain are using data is to improve operational efficiency. Analyzing data from various business processes allows firms to identify bottlenecks and inefficiencies and implement changes to eradicate them.
Overall, the use of data and analytics in the insurance industry is increasingly essential for informed decision-making and improving business performance. However, many legacy brokers, agents, and underwriters suffer from operating multiple systems and data silos, making customer data harder to access, harder to analyse, and harder to keep secure.
This is why so many fast-growing companies within insurance are increasingly looking to consolidate their data and systems onto a single, modern cloud-based insurance platform.
Get in touch today, to find out how Novidea’s born-in-the-cloud insurance platform, built on Salesforce, can help your business grow revenues and optimise operations, through better use of data and analytics.