To paraphrase Mark Twain, everybody is talking about big data these days, but not everyone is doing anything about it. Research has shown that despite its investment in analytics, the insurance industry as a whole is struggling to find the big gold nuggets in all the data it collects.
Insurance carriers are facing a number of challenges, but they all share the problem of dealing with the new, connected, always-on consumer. Insurers hoping to turn these consumers into customers need to be able to offer them a personalized, highly tailored experience that's consistent across multiple channels—in person, online, or mobile.
New non-insurance players entering the industry often have an acute understanding of how to service today's consumers, and they are unburdened with legacy systems and processes. Insurers themselves, however, have been slow to introduce the new products and pricing models needed to provide the tailored service consumers demand. And although insurers have doubled their marketing dollars over the past two decades, they lack a proper understanding of the returns on this investment.
Accenture's Analytics in Action survey covered 600 companies in a range of industries, including insurance. Among the findings:
- Insurers are committing resources and budget to analytics. A third of insurers have the required human and technological resources needed for analytics and are using analytics regularly with some success—significantly above the overall average of 20%.
- Senior insurance management has bought into analytics, but slightly trail the total sample (57% versus 67%).
- Insurers as a group are not using analytics across the entire enterprise, but rather within specific units. In other words, analytics tends to be seen as a tactical rather than a strategic tool. The real opportunity of analytics is to use the entire company's resources to service customers, and here insurance is lagging behind other industries.
- Almost half of insurers (44%) are using analytics retrospectively to understand the past. Only 23% use data insights to predict what will happen, and thus enable themselves to react to customers in real time and to make better decisions.
As Accenture's research indicates, insurers are not reaping the real benefits from their analytics investments because they are simply not ambitious enough about what analytics can achieve. Markets are volatile and customers fickle: A more sophisticated approach will help insurers understand more and control the game much better—and thus begin to achieve the payback they sense is just outside their grasps at present.
The research points to three major barriers keeping insurers from getting the most out of their analytics investments.
- Resources. A third of insurance respondents say they have enough human and technological resources, but more than half say they are being held back by the resources they have (or don't have).
- Culture and organization. While most insurers have appointed a specific person to be responsible for data management, C-level support is not as strong as is needed (57% versus 67% in the total cross-industry sample). Management's support is largely confined to the creation of an integrated data strategy aimed at identifying growth opportunities and monitoring performance.
- Talent mismatch. There is a critical mismatch between the supply and demand of the specialized talent needed to mine analytics gold. Companies are already engaged in a global war for talent, but the battle is that much more fierce in analytics, and even more so in insurance analytics. Insurance workforces are aging, and today's students and graduates are not seeing the industry as a career option. In particular, tomorrow's analytics workforce is likely to be located in developing countries like India and China—and will likely lack insurance-specific knowledge and skills.
These are high barriers, but many insurers have made a good start. Many insurers have been gathering and aggregating data—lots of it—for years. The critical "last mile" involves adapting the tools, technologies and talent to separate the insight from the noise, and this is where many insurers are struggling. Not all insurers are created equal, of course; research shows that high-performing companies invest more effectively in analytics, focusing on newer technologies with an emphasis on insight to outcomes.
Insurers need to create an enterprise model that bridges functional silos. Analytics success will come when they start to look at the company as a whole, and develop ambitious programs that aim for a mixture of immediate and longer-term gains. Insurers also will need a willingness to look beyond the industry to find new ideas. After all, the expectations of their customers are being set outside of insurance.
Insurers may have some way to go before achieving the desired payback from their investments in analytics.This, however, is opportunity for visionary insurers: those who see the crucial role that analytics can play in improving their businesses, and in building a foundation for growth.
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