The Analytics Driven Insurer

Image courtesy of marketingland.com

By Shikoli Makatiani

The way insurance is done is changing at a fast pace, an industry once known for being highly risk averse by nature is quickly learning to embrace change mostly out of necessity rather than by choice. There is immense pressure from all fronts including increased competition (within and without the industry), government regulations, globalization, natural catastrophes and changing consumer  behavior.

Business executives and decision makers are hard pressed to come up with viable strategies to help their organizations compete and thrive. Suffice to say many don’t realize they already hold a piece of the puzzle to their breakthrough. That piece being the immense data at their disposal.

Data has become a key strategic asset for businesses. For the insurance industry this is not an entirely new concept because of the industry’s heavy reliance on data to make decisions around risks, premiums and claims. And though insurers through actuaries have for decades been able to extract some viable information from their data, the recent advancements in technology have created an upsurge in the amounts of data being produced presenting a mixed bag of both challenges and opportunities.

The challenge is how to harness this new data - gather it, store it, evaluate it and make sense out of it especially with the complexity presented by the huge volumes, the wide variety and the speed at which this data is coming in. Sifting through this vast amount of data is not easy especially with limited computing power, expertise and resources at hand.

Snapshot of Turnkey Africa's TurnQuest Analytics Dashboard

The main motivation that should be driving insurers to find a way to quickly overcome this challenges is the immense opportunities available in leveraging such data to gain insight into prospective markets, risks, competitors and customers. Insurers now have the unprecedented opportunity to augment client’s risk details using data from multiple sources like emails, public records and even social media. And with this form of data enrichment comes the possibility of more accurate pricing and rating, validation of information originally received from clients and creation of targeted products.

Data enrichment cannot happen unless insurers employ data collection and analysis tools and techniques that are best suited to their needs. Data analytics – the science of examining raw data with the purpose of drawing conclusions about that information – is a good place for insurers to start. With data analytics insurers have the opportunity to aggregate data from both internal and external sources to detect trends and patterns that might otherwise be missed.

Data analytics falls within the bigger umbrella of Business Intelligence (BI) which is mainly the use of data to inform and facilitate business management and strategizing. While BI is mainly about data driven decision-making, data analytics is about seeking answers to the type of customer sales, marketing and customer service questions asked by most companies. By incorporating the power of analytics into their day to day decision making, insurers can minimize their exposure to risk through risk profiling, eliminate fraud at point of sale and benefit from a reduction in lost premiums and claims leakage.

While insurance companies have generally lagged behind their financial services sector counterparts in adoption of new-age technologies, the impetus to invest in analytics has never been greater. The ability to look into the past (hindsight), the present (insight) and glimpse into the future (foresight) puts an analytic driven insurer in the enviable position of being able to make the most of their information assets and discover new opportunities for enhanced business performance and competitive advantage.