In a highly competitive market with tight margins, slow growth and high operating cost, life insurers are rapidly adopting predictive analytics to boost their business performance and customer relations according to a new survey conducted by Willis Towers Watson (WTW).
The survey, carried out across nine European countries, revealed that over 80% of firms are already using predictive analytics and have enjoyed a positive business impact – with none reporting negative outcomes.
It found that 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 10 firms said predictive analytics helped them to 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.
WTW director of insurance consulting and technology Alastair Black said, “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.”
He added, “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 primary drivers for use of predictive analytics are in-force management – such as improving client retention, improving customer experience, 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 COVID-19.
“The future of insurance is digital. 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,” said Mr Black. M