P/C Insurers See Wide Uses for Predictive Analytics: Willis Towers Watson

Property/casualty insurers plan to drastically widen their use of predictive analytics over the next two years to expand and grow their operations, a Willis Towers Watson survey has found.

What’s more, usage-based insurance information could see the biggest surge as a big data source. The consultancy’s 2015 Predictive Modeling and Big Data Survey determined that UBI data deployment could grow from 10 percent now to 42 percent in two years. By the same token, agent interactions as a big data source is expected to jump from 2 percent to 27 percent over the same time period, according to the results.

Klayton Southwood, director of Willis Towers Watson’s P&C Practice, said that this expected wider embrace of predictive analytics and big data for more insurance industry tasks comes down to a simple thing: growing a carrier’s business in new ways.

“Insurers who embrace predictive modeling complexity by focusing on data enrichment, advanced analytics and technology can achieve a significant return on their investment,” Southwood said in prepared remarks. “Carriers who catapult beyond their competition do so, in part, by leveraging superior data organization and analysis. For those insurers aspiring to unlock the potential of big data, they must be strategic, persistent and consistent.”

About 54 percent of insurers surveyed said they use predictive models for underwriting and risk selection. But large numbers of respondents also said they’d expand use of the technology into fraud potential, claim triage, report ordering (credit, MVR), litigation potential, premium audit and marketing/advertising, the survey found.

Some additional predictive modeling findings from the survey:

• About 28 percent of respondents said they’d use predictive modeling for fraud potential. That will jump to 70 percent in two years.
• Approximately 10 percent said they use the technology to calculate litigation potential. That jumps to 61 percent two years from now.
• While 18 percent said they rely on the tech for marketing and advertising, that number grows to 52 percent in two years.
• 42 percent said that big data helps with pricing, underwriting and risk selection, but 77 percent expect it to do so within two years.
• 60 percent said they expect big data to help inform their management decisions two years from now, up from 19 percent today.
• 58 percent said they envision big data helping their loss control and claims management within two years versus 17 percent now.

While big data sources are expected to explode from usage-based insurance, telematics and agent interactions, carriers see those sources also growing in other areas. About 33 percent of carriers expect their big data sources to come from customer interactions within two years compared to 10 percent now. About 21 percent of carriers said big data sources will tie to social media in two years compared to 6 percent now, according to the survey.

It won’t all be smooth sailing, of course. A large number of respondents said that the use of big data must overcome challenges including the availability of resources and training, data capture and availability, cost considerations, aging infrastructure, executive buy-in, and lack of clarity on structure.

Willis Towers Watson conducted the survey from Sept. 9 through Nov. 2, 2015. About 11 percent of U.S. personal lines carriers participated, along with 17 percent of commercial lines carriers.

Source: Willis Towers Watson