Insurance CEOs are well aware that analytics is the key to business agility - it can help reduce costs, automate processes, remove waste and enhance decision-making. Indeed, they cited in KPMG International's survey that their top strategic priority is to become more 'data-driven', and almost nine-in-ten say they have put new investment into data and analytics over the past year.
Many insurers have made strong progress in their use of analytics and analytical models across the front, middle and back office. They have poured resources into improving their data management and analytical capabilities, and almost every insurer has start to gain strong proficiencies in areas such as propensity modeling, claims analytics, clustering and customer analytics.
Even though many insurance CEOs think they might be ready to move onto more advanced analytics approaches such as artificial intelligence, cognitive computing and machine learning, most seem to be struggling to step up their game. Few have achieved the level of analytical sophistication required to rival some of their newer, more agile competitors. Besides, 43 percent of CEOs surveyed expressed concern that the lack of quality data is hindering depth of insight.
There are many reasons why traditional insurers may be struggling. Most are trying to deal with their legacy IT environment which - having often been stitched together through a series of mergers and acquisitions - has become cumbersome. Their data is often locked up in incongruous silos, making it difficult to gain an integrated view of their customers across various products. Some are worried that too much analytics-driven automation may disrupt their historically strong customer relationships.
Insurtech companies, on the other hand, have based their business models and customer propositions on analytics. They understand the value of creating a 'single view of the customer' and they use that data and analysis to automate their entire value chain - from client onboarding and risk assessment through to claims and settlement. They are aiming to not only improve the overall customer experience, but also to reduce their process time and improve their cost to serve.
For now, the traditional insurers still have the upper hand as they boast deeper relationships with their customers and have much more customer data to develop more valuable insights and deliver a much broader range of services across the value chain; but they will need to move quickly and with purpose if they hope to retain that advantage.
While insurers may face many challenges and risks with stepping up their analytics, we believe there are four key areas where they can focus on to eventually outperform their competitors:
Given the pace of change in today's insurance marketplace, traditional insurers who want to truly compete and win in this new data-driven environment will need to move faster, with more purpose and confidence towards more sophisticated forms of analytics.
Contact your local KPMG advisors to learn more about how we can help step up your analytics game and outperform your competitors.