Harnessing data and analytics: A game changer in the insurance industry

Harnessing data and analytics: A game changer in the insurance industry

In the realm of insurance, data and analytics aren’t newcomers. However, the surge of digital technologies and the rise in both structured and unstructured data availability have amplified the potential applications for these tools. These are driving not just new forms of risk assessment but also catalysing revenue growth, mitigating fraud, and enhancing operational efficiency.

Data-informed decision-making aids not only underwriters, but also insurance intermediaries such as agents, brokers, and MGAs. This approach enables penetration into untapped markets while simultaneously maximising profitability.

InsurTech company Novidea recently explored how insurance firms throughout the value chain are exploiting data and analytics:

Risk assessment and underwriting with precision

Dating back to the industry’s genesis in the 17th century, underwriters have utilised accessible data to forecast event probabilities. Initially, it was about the odds of merchant ships safely returning to Europe with tradable commodities.

With the passage of time, the data application has evolved to account for nearly every conceivable risk, including new or swiftly changing ones such as natural disasters and cyber threats. Navigating such rapid risks necessitates massive volumes of data and their collection and analysis as close to real-time as possible.

MGAs, with their specialist market knowledge and advanced risk models, are increasingly underwriting new business more lucratively than many carriers. Simultaneously, brokers and agents benefit from the ability to market a broader spectrum of more bespoke products into new, global markets.

Catalysing business growth

MGAs are using their specialised knowledge to stimulate business growth, securing capacity from carriers in new, rapidly evolving risk categories, such as cyber threats and niche SME business. Similar trends are observable across the value chain. Insurance firms with superior data access and analytical capabilities can outmanoeuvre competitors or establish a stronghold in previously underserved markets.

Many insurance firms with cloud-native insurance platforms are better at customer segmentation, tailoring their offerings and marketing communication more effectively. Many InsurTechs and tech-savvy carriers analyse customer data to create more suitable and appealing products for specific customer segments.

Enhancing claims ratios

In the face of escalating claims inflation, reducing claims wherever feasible remains critical. Carriers are leveraging sophisticated data analysis to identify fraudulent claims, remove higher risk customers, and expedite genuine claims processing. Some are pushing boundaries further by using IoT or wearables to amass more data for decision making. This strategy is reducing claims costs and improving ratios. In many instances, MGAs’ sophisticated underwriting models are contributing to superior claims ratios.

Optimising operations

Many insurance firms are using data to enhance operational efficiency. They examine data from various business procedures to pinpoint bottlenecks and inefficiencies, implementing changes to eliminate these hindrances.

Despite its importance in decision-making and performance enhancement, many traditional brokers, agents, and underwriters struggle with multiple systems and data silos. This makes customer data access, analysis, and security more challenging. To overcome these barriers, fast-growing companies within insurance are consolidating their data and systems onto a single, modern, cloud-based insurance platform.

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