Most insurers planning heavy investments in data, analytics
Digital tools for predictive modeling, pricing and risk selection are among the top priorities being earmarked for investment in 2021.
With nearly a quarter of insurers indicating the pandemic has accelerated their digital strategies, 83% are planning to invest more heavily in data and analytics during 2021, according to a survey from Insurity.
Predictive scoring, pricing and risk selection tools were cited as top priorities for data and analytics investing, the survey found. Other high-priority areas include real-time underwriting performance monitoring and management as well as spending on third-party data sources.
Concerning third-party vendors, 32% of survey respondents said they would be incorporating more hazard information from these sources moving forward.
“The benchmark of what makes ‘good underwriting’ is evolving rapidly,” Kirstin Marr, head of data solutions at Insurity, said in a release. “It’s no longer enough that insurers have solutions to manage their internal data, explore third-party data and utilize advanced analytics. To build a competitive advantage, they must seamlessly incorporate analytics at every point in the decision-making process. We can expect to see more insurers shift their mindset to becoming analytics-driven throughout the policy lifecycle.”
Better risk assessment through predictive analytics
When it comes to embracing predictive analytics, Insurity reported better risk assessment is the leading driver, followed by more accurate pricing, protecting against adverse selection and staying ahead of the competition, respectively.
Although a significant majority of insurers are using predictive analytics in some form in underwriting, most have only been doing so for the past four to five years, Insurity reported. This shows that while powerful, incorporating data analytics into an overall corporate strategy is still relatively new.
Interestingly, 72% of respondents said they have moderate to high concerns about underwriters’ adoption of digital predictive tools. Insurity noted this is in line with earlier research on the subject, which found worries were driven by the belief underwriters would depend too heavily on data and less on professional judgment.
“It’s clear that insurers who are putting advanced analytics into practice are seeing the value in both the short- and long-term,” said Marr. “The competitive differentiation provided by data consortiums, predictive analytics, geospatial analytics and other forms of advanced analytics enables more actionable insights. We’re clearly seeing market momentum behind investing in data and analytics to drive better decision-making.”
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