Insurers run selective race into advanced analytics, prioritising revenues before claims, mass market before commercial

Insurers continue to plod into advanced analytics, making the greatest inroads on the pricing and risk selection side of the business for mass market products while frequently even swearing off new technologies in select commercial lines, a new survey by  Willis Towers Watson has shown.

Pricing and underwriting/risk selection top the list of uses for advanced analytics, named by 83 percent and 57 percent of the panel respectively, higher than for any element of the claims process. Only 41 percent of the panel utilise new techniques for judging future claim severity and only just over a third for claim triage or fraud investigation, according to authors of the 2021 survey report "Advanced analytics: Insurers move forward despite obstacles and competing priorities."

Unsurprisingly, advanced analytics is most prevalent in mass market product lines, starting with 82 percent utilisation in automotive, and 67 percent utilisation in homeowners and 60 percent in the travel specialty line. Virtually everyone else on the panel has plans to develop capacities in those areas.

Amongst exceptions to the growth rule, telemetrics "has lost some of its luster” with declining usage amongst all lines since the prior survey in 2019, authors wrote. Automotive remains a hold-out, with just over 40 percent of the panel claiming usage.

"Further data cuts support the view that telematics is becoming more of a niche play for insurers that have been early adopters," authors wrote. Nearly 70 percent of the panel named the cost/benefit trade-off of making inroads as the main barrier.

Utilisation for commercial lines is notably lower, ranging from 42 to 48 percent of the panel. For commercial general liability, COP/CPP and property, over a third of the panel even swears off any plans to build advanced analytics capacities down the road.

Intentions may be ambitious, but time and organization raise notable obstacles, authors said of the road forward.

"Many insurers say they have struggled to juggle priorities and overcome obstacles that would enable them to make progress at a faster pace, as many had envisioned," authors wrote. Time and data management, handling and warehousing take the bulk of the blame.

Insurtechs can take some of the load, chiefly on the revenue side.

Over half of the panel claim an active working relationship with the InsurTech community, and 10 percent are fully commercialized. The percentage of insurers with no InsurTech relationships fell 6 pps over two years to 16 percent.

Insurtechs are more likely to play a role in risk selection and pricing, named by 52 percent of the panel, than distribution (43 percent), CRM (39 percent) or even claims management, seen as an InsurTech focus by only 30 percent of the panel.

The positive impact of efforts to date appears to be accruing to the early starters, with the percentage of firms enjoying "strong" top- and bottom-line benefits driving all of the increase in benefits vis-a-vis the 2019 survey.

The percentage of insurers enjoying "strong positive impact" on the top line from their ventures into advanced analytics has doubled over two years to 20 percent with another 49 percent now claiming "somewhat positive" impact.

But now, as in the 2019 edition, just over 30 percent of the panel claim they have undertaken efforts, but have yet to take any positive top-line impact.

By the bottom line, positive impacts are more prevalent: 88 percent claim positive bottom-line impact from advanced analytics, including 46 percent with a "strong" positive impact.

The Willis Towers Watson 2021 P&C Insurance Advanced Analytics Survey was conducted amongst 90 insurance representatives in the United States and Canada from 71 P&C insurers. Respondents include six of the top 10 P&C insurers in the US and five of the top 10 in Canada.

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