Using data to gain a competitive advantage seems to be a hot business topic these days, but hasn’t analyzing data always been the norm for the insurance industry?
While it’s true the industry has relied on various data points to evaluate risks, set prices and sell, data siloing has been the norm. For example, underwriters, actuaries and new business development teams might be working from different data sources and using different parameters to measure and make business decisions. But computing speed, digital handshake capabilities, and the volume and variety of data available are transforming how information can be collected and parsed into actionable intelligence.
So, in today’s world, what is data analytics for insurance, and what’s the value to insurance agents? This article tackles those questions and looks at emerging trends to see what lies ahead.
Why is data analytics for insurance important for the insurance industry?
By harnessing the vast amounts of data available today and employing the right business intelligence solutions to make conclusions about that information, data analytics is useful to the insurance industry in every facet of its business: to model what-if scenarios, diagnose why something happened, predict what might happen and determine what should be done next.
As such, data analytics is important to the insurance industry because the insight it offers can be used to scale value to everyone under the insurance umbrella: the insurer, the agency and the customer.
There are many practical applications for data analytics in insurance. These include mapping risks, setting pricing, targeting prospects, tracking sales and service, analyzing claims, detecting fraud and studying consumer behavior. A simple illustration of how insurance companies are using data analytics in property insurance is the monitoring of weather patterns, claims history and construction costs to model risks and set pricing. Access to enriched data associated with a geographic location can also help an agent meet the needs of customers in real time, such as recommending flood insurance to a new homeowner.
What can insurance agents do with data analytics?
Employing data analytics opens the door for agencies to begin benefitting from greater transparency and insights. If using data analytics seems too complex or out of reach, consider the following low-barrier ways agents can get started by leveraging their Agency Management System (AMS) and Customer Relationship Management (CRM) capabilities:
- Pair records with third-party sources: To enrich prospect and client records for quoting, cross-selling and upselling, explore the agency’s system of record’s pairing capabilities to third-party data sources. For example, pulling in geographic information, such as weather and geo-specific risk factors, can be paired with prospect and customer records to deliver customized personal and commercial lines property coverage solutions based on those risks. This can also help identify coverage gaps and spotlight new opportunities within an agency’s book of business.
- Set up marketing reporting: To build marketing campaigns that target new prospects and convert leads in the pipeline to sales, set up reporting from the system of record to mine lead generation data and reveal a customer’s journey from first contact to sale. Use that data to inform future marketing efforts.
- Aggregate the data of online reviews: To gauge customer satisfaction, automatically track online reviews and aggregate that data over time to illuminate and fix what’s not working and continue to support what is.
- Automate sales reporting: To gain producer insight, set up automated reporting to track sales activities and conversions to illuminate producer productivity. Use that insight to automate rules for assigning leads based on the data, such as the geographic location of the lead, required expertise and potential deal value.
- Set up automated triggers: To support customer service activities, set up automated triggers based on the data in the system of record to identify and alert staff to reach out to clients to check up on claims, identify cross-sell and upsell opportunities, or strengthen at-risk relationships.
2024 data analytics trends for insurance
Advancements in data analytics have led to rapid transformations in the insurance industry. Top trends include focusing on opportunities with predictive analytics, which allow for a deeper understanding of individual client preferences, life circumstances, potential risks, and buying behaviors. These insights can deliver on a customer-centric approach, from seamless and tailored sales and service experiences to risk prevention. Nationwide continues valuable partnerships and investments to stay on the forefront of these data analytics trends. Examples include:
- Investing in the award-winning AI platform, CLARAty.ai, which uses predictive AI, generative AI, and large language models to extract claims data to deliver concise case summaries, predictive alerts, and actionable recommendations to claims associates to inform data-driven decisions.
- We’ve teamed up to make CompScience’s Intelligent Safety Platform available to more business owners and prevent workplace injuries.
- Investing in climate-tech company Mitiga Solutions. The company combines scientific models with technology to better evaluate the impact of natural hazards, helping industries like insurance understand and address the risks and uncertainties of climate change.
- Raising awareness and advocating for the adoption of modern building codes and resilient infrastructure. With our partnership with IBHS, we understand, based on scientific research, that enhanced building codes protect people and their property during severe weather events.
Advancements in data availability and technology are chief drivers of the scale and speed at which businesses can use data analytics to their advantage today. Specific to insurance, the following trends are likely to shape the industry in the short term:
Fraud prediction—Using business rules and red flags to detect insurance fraud isn’t working, costing businesses and consumers an estimated $308.6 billion a year.1 Initiatives that drive the use of predictive modeling, link analysis (the evaluation of how data is connected) and artificial intelligence (AI) to prevent fraud before it happens is top of mind for insurance companies.
Niche communications with marketing automation—With the ability to target specific clients, you can tailor your content to resonate with their needs –from welcoming them to the agency and providing educational content about policy options, to risk management tips, and celebrating milestones. With continued measurement data you can then utilize retargeting campaigns to stay top-of-mind with clients through an informed and automated marketing journey.
Personalized user experiences—With access to exponentially increasing sources of third-party data from IoT devices and the wider adoption of machine learning, chatbots and AI, insurers will continue to advance ways to turn the customer experience from a one-size-fits-all approach to a seamless automated journey where products are personalized, pricing takes into consideration behavioral data and claims can be settled quickly.
Predictive analytics — Predictive analytics has been a game-changer for the industry with the ability to make data-driven decisions by forecasting trends, identifying risks, and tailoring offerings more efficiently. In 2024, leveraging predictive analytics will become even more critical as agents seek to offer personalized coverage that match the unique needs of each client.2 In addition, by analyzing data patterns and customer behavior, insurance agents can predict which clients might be at risk of letting their policies lapse and proactively engage them with retention strategies.
The future of data analytics
As data and analytics trends continue to evolve, combining predictive power and personalization, remember these trends are more than numbers. Armed with the right data, you can guide your agency toward informed decision-making and refined risk management that can ultimately enhance your client relationships. Taking time to understand these trends will help you unlock opportunities for differentiating your business.