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Balancing a Double-Edged Sword: Analytics and New Technology Bring Competitive Opportunities – and Threats – to the Insurance Industry


Every opportunity presents its own set of challenges. For insurance companies, the trend toward advanced analytics is proving to be a game-changer – forcing many insurance outfits to play catch-up.Though it might be an arduous task to adapt to such a fast-moving technology trend, the benefits are undeniable for segmenting products, developing distribution strategies, setting assumptions for financial reporting, and developing metrics for risk management.

Seeking balance as an insurance CEO

Insurance CEOs polled for the 18th annual Global CEO Survey from PricewaterhouseCoopers (PwC), detailed in an Insurance Business article, already see the benefits of adopting the latest technology:

  • 90% acknowledge that digital technology can help sharpen data analytics
  • 88% noted technology benefits on operational efficiencies
  • 81% cite resulting benefits for the customer experience

However, these CEOs are also attuned to the double-edged sword presented by such technological disruption – with 70% viewing these rapid innovations as a threat to growth. They feel that these constant changes are breeding increased commoditization and the need for lower-cost digital distribution and advanced digital profiling in order to respond more effectively to customer demands.

Ultimately, the companies that thrive will be those that employ these digital technologies to engage with customers in a more meaningful way.

Recognizing how the benefits of analytics in insurance outweigh the risks

Early adopters are in the driver’s seat. They’ve already mastered the rollout and management of these new technologies and can now exploit them to their fullest potential – gaining greater insight into customers that strengthen relationships and build loyalty. So how do you get started? What are the right questions to ask?

First, focus on taking the mountain of data at your company’s door and turning it into real, actionable information. Address your company’s need for predictive and data analysis. A recent PwC publication encourages insurance companies to pose questions such as:

  1. 1  How do we improve the productivity of our sales force?
  2. 2  How can we identify emerging experiences more quickly?
  3. 3  How should our capital allocation strategy respond to different economic and regulatory changes?

For example, to ensure a positive customer experience, you need to forecast how customers will behave under different economic conditions. With advanced analytics, you can create simulations to understand how customers choose and use your insurance products in various economic conditions. Customer behavior simulations are only possible when vast digital data is stored reliably and at low cost.

Preparing for the opportunities – and challenges – ahead

Advanced analytics are giving rise to even more complex technologies such as in-memory computing – and such complexity requires greater collaboration among various disciplines.

To remain relevant and find success in this competitive climate, you will need:

  1. 1  Consistent, high-quality data to better price risk, develop and market products, and target customer segments
  2. 2  A more holistic view of customers that paints them as individuals with specific needs, not as a single data point
  3. 3  Effective contributions from everyone in the company that encourage total collaboration and help break down silos

Get started on your path to innovation today by learning how to wield the power of advanced analytics for your business’s benefit!

Read the following white paper from The Economist Intelligence Unit, sponsored by SAP, The Way Forward: Insurance in an Age of Customer Intimacy and the Internet of Things. Link


Note: Pat Saporito is an expert on insurance industry analytics and the author of the book Applied Insurance Analytics, published by Pearson/FT Press.