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Group Insurance’s Brave New Data-Driven World

Introduction

Group insurance inhabits a brave new data-driven world. It’s one where data and analytics are essential for personalizing customer engagement, improving overall business value, and for efficient business operations among leading industry players. By incorporating data and analytics into ongoing digital transformation, insurers can also take advantage of the untapped potential in their organizations and in the greater insurance ecosystem.

Immediate Benefits

Data and analytics can provide some immediate advantages long before future gains are realized. Namely:

  • Increased sales. Data and analytics can assist insurers in selling to segments that were previously unreachable, unprofitable, and unknown, and by supplying new and innovative products at an accelerated pace.1
  • Improved pricing and risk selection. Insurers can use predictive scoring and analytics to help buttress underwriting and claims processes for improved underwriting and risk comprehension. Analytics technology can also assist insurers in reducing losses through improved anomaly and fraud detection.2
  • Reduced overhead. Technology can provide operating efficiencies and productivity gains.3

Consistent with the rapid pace of today’s data-driven world, insurers have already devised specific use cases to quickly realize the above benefits.

  • For greater sales, insurers are “pre-underwriting,” or using internal and third-party customer data to target based on probable risk and indicate premiums up-front. They are also using data mining to identify customers with unique characteristics to tailor marketing efforts while using analytics for retention and upsell modeling to determine which customers are retention risks based on previous behaviors and demographics.
  • To realize improved pricing and risk selection, insurers have become more proactive in improving loss ratios by incorporating predictive claims severity scoring, where insurers use internal and third-party data to predict the severity of claims and inform adjustments. Other popular methods include predictive claims fraud scoring to identify fraudulent claims and using a book of business impact model to pinpoint individual risks and aggregate exposure across the entire business.
  • To reduce overhead, insurers are implementing data and analytics to improve underwriter and adjustor productivity, while automating the assignment of incoming risks to specific adjustors based on claims characteristics, skills match, and capacity. They have also implemented claims straight-through processing, which automatically adjusts, scores, and sends incoming claims for review or for manual adjustment.

The Tools of the Trade

Whether implementing data and analytics methodologies by themselves or through third-party vendors, insurers must remain aware of tools and strategies to enhance their vision, delivery, and outcomes. Since data and analytics have become indispensable to a successful digital business, and their adoption is predicted to increase from 35% to 50% by 2023, insurers need to be aware of and familiar with data and analytics tools and strategies,4 including:

  • Supporting platforms. Insurers will need data and analytics platforms, trust-based data sharing, and synthetic data for AI development, and for healthy returns on investment, insurers will also need to continue to modernize existing governance practices.5
  • Continuous AI. Insurers will need to target AI for measurable gains in business value, emphasizing continuous delivery of AI-based systems. AI usage has tripled during the past two years, requiring insurers to reevaluate their core infrastructures and optimize for AI productivity.6
  • Collective organizational intelligence. Increased consumerization of analytics and the need for communities are changing the analytics, business intelligence, and data science landscape. Insurers must leverage the collective intelligence of their organizations to compose effective and augmented analytics solutions.7
  • Data and analytics as a core business function. To be competitive using data and analytics, insurers need to leverage a broad range of data assets, internal and external. They must improve and enrich data and analytics governance and ensure impactful use of data and analytics by building data literacy skills.8

Final Thoughts

Data and analytics have become an integral part of the industry landscape and are no longer optional for group insurers to ensure customized member engagement and streamline business operations. By firmly embedding them in their business growth objectives, carriers can become more agile and aware of their transformation opportunities, to establish the right strategies to achieve long-term vision and expedited delivery.

For the accompanying “Analytics-Driven Insight,” webinar, click here.

 

1 “Data and Analytics in Insurance: Building the Business Case,” Novarica, June 2019.
2 Ibid.
3 Ibid.
4 “Over 100 Data and Analytics Predictions Through 2025,” Gartner, March 2021
5 “Top Trends in Data and Analytics for 2021,” Gartner, February 2021
6 Ibid.
7 Ibid.
8 Ibid.

About the Author

Ali Kheirolomoom

Ali Kheirolomoom is Vitech’s Chief Product Officer and is responsible for Vitech’s strategy and vision, product management, software engineering, and cloud operations. Ali possesses over 26 years of experience in enterprise software and a proven track record of technological transformations of on-premises software to cloud-native deployments. Prior to joining Vitech, Ali served as the Chief Product Officer for Guidewire Software and was also formerly the Global Head of Products at Serena Software. Prior to these roles, Ali co-founded two SaaS startups, Apptero and Avinon.