Survey Finds Insurers Embracing the Potential of Advanced Analytics

The use of advanced analytics across various aspects of their operations is an important part of North American property-casualty insurers' strategies, according to Willis Towers Watson (WTW).

While the insurers are applying the analytics to a broad array of their business functions, their interest in analytics is most notable in pricing, underwriting, and claims, WTW found in its 2021 P&C Insurance Advanced Analytics Survey, November 30, 2021.

The percentage of respondents indicating that advanced analytics have a strong impact on a company's top line doubled in this year's survey, to 20 percent from 10 percent in WTW's previous survey in 2019. The percentage citing a strong positive impact on companies' bottom lines increased as well, to 46 percent this year from 37 percent in 2019.

"Outside a small set of respondents who express doubts about the business case for advanced analytics, either due to concerns about cost or the ability to explain outputs to either management or customers, the North American P&C market still looks set on a course for increased use of advanced analytics," Lisa Sukow, director, North America P&C practice, Insurance Consulting and Technology, Willis Towers Watson, said in a statement.

"There is continuing optimism from the companies surveyed about the impact that advanced analytics has had on both top- and bottom-line performance," Ms. Sukow said.

Time is the biggest obstacle to applying the advanced analytics, the WTW survey found. Survey respondents also mentioned data management, data handling, and data warehousing as other factors that are slowing progress.

While the COVID-19 pandemic has played a part in limiting the time and resources insurers could devote to advanced analytics, the impact has only been marginal, WTW said. Just under 40 percent of those surveyed reported they don't anticipate any change to their plans as a result of COVID-19.

Other issues that have caused struggles for insurers in meeting their advanced analytics ambitions include information technology (IT) infrastructure, organizations' data dexterity, and corporate cultural barriers, according to WTW.

Prioritization of advanced analytics projects within the wider business was cited as an obstacle by more than 60 percent of survey respondents, with other obstacles including complexities linked to IT, data, modeling, and customer understanding.

The survey showed that advanced analytics is becoming entrenched as a source of potential competitive advantage among insurers, and, despite some constraints, the survey showed "strong pockets of progress" in the 2 years since WTW's last advanced analytics survey.

Willis Towers Watson said that while insurers recognize the opportunity to increase the use of advanced analytics in rating and pricing, a larger role is likely in the underwriting process, including automation levels and decision support. In addition, advanced analytics in claims have accelerated at a faster rate, in part because of the number of gaps to fill in capabilities, WTW said.

Over half the survey respondents indicated that they have an active working relationship with the InsurTech community, WTW said. The percentage of respondents indicating they have nothing to do with InsurTechs fell from 22 percent in 2019 to 16 percent this year.

The survey found that insurers' use of telematics data has stayed constant or declined slightly since the last survey in 2019. "This may be because companies that went in early and strongly on telematics usage and propositions have taken off some of the sheen and attractiveness of the potential opportunities in certain markets for companies that didn't," the survey report said. "Equally, companies may feel there are less complex advanced analytics targets and benefits for them to pursue."

Ms. Sukow said that there are steps insurers can take to restore or build momentum behind targeted applications of advanced analytics. They can reduce costs and increase available time by investing in data analytics expertise, leveraging InsurTech, and having flexible IT capacity, she said.

"More analytics means more data, which exacerbates problems with IT bottlenecks and/or connectivity between systems," she said. "The survey shows more companies taking advantage of the cloud and upgrading analytics tools, but these have largely scratched the surface of what can be achieved with the likes of on-demand capacity and [application programming interface]-enabled software."

Ms. Sukow also noted that many insurance companies still aren't maximizing their use of the huge amounts of internal data they hold. The right technology could more effectively tap the value of data available from such sources as images, unstructured claims, underwriting and customer information, and text mining to help insurers transform product propositions and profitability, she said.

Willis Towers Watson's survey involved two distinct Web-based surveys that were distributed to property-casualty insurers in the United States and Canada during the first half of 2021 to gather their insights about the future of advanced analytics. One of the surveys targeted technical roles, the other senior executives.

Respondents included 56 in technical roles and 34 executives from 71 property-casualty insurers, including 62 multiline insurers, 3 commercial lines insurers, and 6 exclusively personal lines insurers. Respondents represented 6 of the top 10 property-casualty insurers in the United States and 5 of the top 10 in Canada.