Meanwhile, on the horizon and fast approaching is a new set of capabilities that will take analytics and the power they can bring to the next level. Artificial intelligence (especially machine learning), cognitive computing capabilities, new geospatial data and technologies, and preventative analytics promise to yield differentiating capabilities to insurers bold enough to leverage them.

The challenge many have is sorting through all the potential capabilities in the data/analytics space and developing a strategy and plan that aligns to and supports their business strategy. Keeping track of the new developments and how they might be applied to specific business problems or opportunities is daunting.

To aid insurers, SMA has recently updated our SMA Data and Analytics Spectrum. This framework has already been used by many as a way to understand what types of capabilities are needed to address specific types of business questions as well as to filter and assess tech solution providers.

5 areas of the data & analytics spectrum

The SMA Spectrum has five areas, and our research highlights the fact that the industry, in general, has made great progress in three of those areas but is lagging in the other two. The areas SMA terms Describe and Diagnose are the province of traditional BI where insurers have much experience and, for the most part, have solid capabilities.

The Predict area of the framework is where insurers have put a great deal of effort and investment over the past several years to build up capabilities. Predictive analytics and models are becoming more widespread and more important in the industry today.

However, there is an area that SMA terms Discover, that enables companies to explore the WHY — using advanced tools to dig much deeper to gain a new awareness into the root causes of problems or the genesis of new opportunities. This is a nascent area with much potential for insurers looking to expand usage of text mining, image mining, speech analytics, scenario planning, and other analytics tools.

Finally, a new category of analytics is emerging in the SMA Spectrum that is called Prescribe. The notion of prescriptive analytics has been around for a while, but they are becoming practical now, and insurers are beginning to implement these capabilities.

Real-time data from smart devices in conjunction with big data, machine learning, and cognitive computing technologies are making it possible to recommend specific actions and, in some cases, automate the actions. Layer in geospatial analysis to provide context and new data and even more potential is there to predict, prescribe, and even perform actions without human intervention.

Outgun competitiors

The power of data and analytics is confirmed by the new organizational approaches being taken by insurers, new roles being established, and investments in major initiatives to outgun competitors who are also seeking to gain advantage through data and analytics.

You might think that the industry is reaching a peak in terms of the leverage from analytics, but with the rapidly evolving digital world and the new capabilities — you ain't seen nothin' yet!  

Mark Breading is a partner at Boston-based SMA. Email him at [email protected]. This article first appeared on StrategyMeetsAction.com and is reprinted here with their permission. Opinions expressed in this article are the author's own.