How Big Data and Analytics are Changing the Way Insurers Do Business

Posted by Richard Jacobson

It is my pleasure to introduce a guest blogger for this latest post. Steve Lessaris is a Client Development Manager with our Professional Insurance Recruiting practice. Steve recently attended the 2nd Annual Analytics for Insurance USA Conference and gathered some insights that are definitely worth a read. Enjoy… 

Big Data and AnalyticsThe recent advances in analytics and big data have revolutionized the business world, changing the way we play sports, shop for goods and track information. For insurers, analytics has transformed business practices and even introduced new job functions. Already, 2015 has been dubbed the year of technology-driven transformation within the industry. 

Originally embraced by certain segments of the industry, analytics is now permeating across all areas, including sales, marketing and customer service. Recent research has shown that more than one-third of insurers are investing in predictive analytics. The result is significant improvements in processes and new products that deliver value and efficiency to customers. 

But how exactly are the changes in analytics and technology influencing the insurance industry? We’re spotlighting four areas where advances in analytics are changing the way insurers do business: 

  1. Managing Risk: Past generations of insurance agents were directly connected with their customers; they knew their communities and the risks involved with providing insurance to local individuals and companies. However, a move toward decentralized agencies and an uptick in online applications has affected agents’ abilities to assess risk. With analytics providing access to a myriad of data, agents are able to build statistical models to better understand and quantify risk. For example, carriers are now able to pull demographic data, credit activity, ‘business climate’ scores—including ROI, failure rate and tax data— to determine which companies are higher risk.
  1. Determining Pricing and Upselling: With analytics, organizations are able to track the performance of applications throughout the quote process and identify patterns in price preference and coverage type. Combined with social media activity, past account information and website click data, insurers can provide tailored options and suggest additional products that meet the needs and budgets of consumers.
  1. Analytics and InsurancePersonalizing Products: Creating models to review customer habits based on collected data, including demographics, health background and account information is helping insurance organizations adapt products and premiums to the individual customer. As a result, they are able to offer customers highly personalized policies at a competitive premium. An example of this is Progressive’s Snapshot® program and Allstate’s Drivewise®. Utilizing a sensor located in the car, the insurer is able to record average miles driven, typical time of day for driving, average speed and how sharply the driver is braking. This data is then used to determine the best rate for the individual based on their habits and history.
  1. Detecting Fraud: New analytical processes including pattern analysis, social media insight gathering and database monitoring are assisting insurers with detecting and predicting fraud. This collection of behavioral data is being used to create new models that can identify patterns and pinpoint both normal and suspect behavior. For example, companies are now harnessing data analytics to assist in combating garaging fraud—paying a premium based on a residence that is not accurate. Insurers are able to connect vehicle plate databases, which utilize License Place Recognition (LPR) cameras and policy information to determine if drivers are actually parking their car where they say they are, and adjust their premiums accordingly.

 Analytics is impacting all areas and functions within the insurance industry. However, as with all technology, change is happening at a breakneck pace. In order to truly embrace the potential that analytics and big data hold, insurers must embrace the newest advances with creativity and confidence. 

What do you see on the horizon for analytics in the insurance industry?