Insurers’ growing use of predictive data analytics is predicated on enhancing operational efficiency, improving decision-making and offering more detailed pricing of products. It’s that last practice that has provoked a firestorm of criticism.

Executive Summary

With data analytics providing a way for insurers to actually quantify "expected retention"—moving them far beyond the subjective determinations they have used in the past—consumer groups aren't the only ones concerned about the price optimization strategies. Regulators are also studying the possibility that including consumer shopping behavior in pricing setting may be a form of unfair discrimination.

Predictive data analytics leverages statistical techniques to analyze current and historical data to make more accurate predictions about the future. It is considered one of four breakthrough technology-related trends altering centuries-old ways of doing business, the others being social media, mobile and the cloud. Diverse industries are leveraging these tools to improve business forecasts, sharpen marketing methods, and tighten supply chains and compliance controls.

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