Perhaps no one appreciates uncertainty and risk like an actuary. The cornerstone of the insurance industry, actuaries spend all day, every day combing through data and breaking down the probabilities associated with certain events.Whether their primary area is health care, property, life or casualty insurance, actuaries are focused on discovering how likely a given occurrence is to happen and how costly it will be. With that in mind, it's no wonder that the insurance industry is a prime candidate for predictive analytics and big data solutions. In a field where knowledge is king and accurately forecasting the future is the difference between unbridled success and lost revenue, predictive analytics could be the silver bullet.
"The insurance industry is a prime candidate for predictive analytics."
Insurance: An industry in flux
The insurance sector is one of seemingly never-ending change, and actuaries need to constantly make adjustments to keep up and accurately plan for the future. This can cause a lot of stress for industry members, whether they're concerned about the uncertain state of the Affordable Care Act or keeping their eyes on emerging autonomous vehicle technology and its impact on car insurance.
All told, members of the insurance industry face more stress than any other field, aside from lawyers and other legal experts, according to a recent Robert Half study. There is clearly demand for solutions that can make actuaries' lives easier and improve the quality of their work. That's where predictive analytics comes in.
How predictive analytics helps actuaries
Regardless which subset of insurance an actuary operates in, predictive analytics can offer plenty of benefits. For instance, underwriting processes can be drastically improved and streamlined, reducing the amount of time required to carry out these tasks. Part of that comes from the increased access to real-time data that is inextricably tied to advanced analytics solutions. With more up-to-date information flowing in at a constant rate, underwriters can offer more accurate insights while cutting down on the amount of time needed to collect data and produce reports.
Another prime example of the power of predictive analytics is in the property and casualty insurance industry. Beyond underwriting, P&C insurers are using this technology to improve the precision of everything from mapping out fraud probability to prioritizing insurance claims. According to a 2015 Willis Towers Watson survey, 70 percent of P&C insurer respondents identified determining fraud potential to be a primary application for predictive analytics in the near future.
What is the best way forward?
Clearly, predictive analytics show a lot of potential for actuaries and the insurance industry at large. However, correctly deploying this solution and optimizing advanced analytics efforts for success requires laying a fair amount of groundwork first.
Companies may encounter roadblocks on their path to analytics enlightenment, including the need for a top-down organizational mindshift to fully embrace these solutions. As we've noted before, commitment to the process and support from an organization's leadership is essential for success. The insights gleaned from a predictive analytics initiative may upset the normal balance of things by recommending drastic changes to long-standing workflows. The C-suite's approval will be necessary to give a nudge to anyone hesitant to implement these changes.
Focusing on finding solutions to practical problems is a good way to get that support from the top and win over any lingering holdouts across the organization. Once everyone has seen the tangible benefits of predictive analytics and how these solutions can improve the bottom line, streamline arduous tasks and make lives easier, they will be far more likely to get onboard with the program.
It doesn't take an actuary's training to see that predictive analytics is the future of insurance. By getting started on this journey now, companies can begin building out their analytics initiatives and taking advantage of the resulting insights. Contact us today to get started.
Written by Clarity Insights
Clarity Insights is the largest consulting company in the US that focuses exclusively on data strategy, engineering, science and visualization.