Demand for predictive analytics is rising as life insurers look to boost their business performance and customer relations in a highly competitive market with tight margins, slow growth and high operating costs.
After surveying life insurers across nine European countries, Willis Towers Watson (WTW) found that over 80% of firms already using predictive analytics have enjoyed a positive business impact – with none reporting negative outcomes.
The impact of predictive analytics on top and bottom line performance has been greatest in relation to revenue generation, with 68% of insurers agreeing that it has had a positive impact on increased sales and cross selling.
Four out of ten firms said that predictive analytics helped reduce issue/underwriting expenses and claims costs, however, 30% believe that their analytics or actuarial teams lack the capacity to accomplish their predictive analytic goals.
“Life insurers are on the cusp of real transformation, increasingly aware that by making predictive analytics a core corporate capability they can lay a strong foundation for profitable growth and high performance,” said Alastair Black, WTW director of insurance consulting and technology.
“Implementing these new approaches can be a complex process – insurers will need to pick business use cases wisely and identify the most effective way to use data. Having the right talent and tools to process and analyse such vast amounts of data are just as essential if insurers are to harness its full potential.”
The survey found that the primary drivers for using predictive analytics are in-force management – such as improving client retention – improving customer experience, and product innovation and pricing sophistication.
Predictive analytics is currently used most within the individual risk business, but the largest growth is planned in the savings business over the next two years.
The global pandemic has also served as a catalyst for multinationals in particular to adapt and adopt greater usage of predictive analytics, with 36% of those surveyed saying they would now increase their use following the COVID-19 outbreak.
“The future of insurance is digital,” said Black. “We believe the winners will be those organisations that apply digital technologies to be connected, analytic and agile. And if the incumbents cannot get this right then new entrants will.”
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Author: Chris Seekings