There has never been a better time for P/C insurers to use data analytics as a tool to expand their underwriting reach into new markets and risk classes, Swiss Re said in its latest sigma report.

The reinsurer essentially argues that data and analytics are approaching a golden age, with the amount of useful digital data growing by leaps and bounds and analytics tools becoming much more versatile, making both far more viable as underwriting tools than they used to be.

“The amount of digital data in the world is growing exponentially alongside the widespread expansion of sensor networks digital platforms. Successive generations of new analytical tools and techniques can analyze structured and unstructured data, yielding useful insights about individuals and businesses, and also the impact of man-made and natural disaster events, inepensively and non-intrusively,” the report concludes. “By augmenting internal data with external semi-structured data sources, [Property/Casualty] insurers are able to price new markets and risk classes.”

Carriers would do well to take advantage of the fast-maturing and evolving data analytics technology because it can provide insights into untapped opportunities and help to better understand customers, Swiss Re’s sigma report argues. Insurers can also use it to augment their own portfolio data through many linkages with external datasets, and data analytics can also help automate underwriting and claims processing functions, making underwriting far more efficient, Swiss Re said.

Commercial Versus Personal

Carriers aren’t advancing with data analytics technology at the same speed. According to Swiss Re, commercial lines insurers haven’t dived into the technology at the rates their personal lines insurance counterparts have. Personal lines insurers have inched ahead because they’ve been able to access better data quality and higher transaction volumes, but that’s a trend that could change, Swiss Re said, as conditions evolve.

“Now, large and more stable commercial lines such as property are also benefiting from the explosion in data,” Swiss Re’s sigma report said. “They are seeing early signs that incorporating new data sources can reduce the length of risk assessment and improve risk selection.”

Swiss Re said that combining many data sources in new ways is also producing benefits in determining risk appetite and underwriting strategy.

Patience Is a Virtue

In short, Swiss Re said that carriers can have a promising future in their use of data analytics, and the reinsurer expects spending on the technology to rise at a 13 percent compound annual growth rate over the next four years. Even so, there are obstacles, driven largely by insurers’ inherent complexity in terms of their operations.

“Major challenges remain in the form of legacy systems, traditional mind sets and scarce talent at the intersection of data science, risk knowledge and technology,” according to the report.

Still, Swiss Re said, insurers are likely to unlock data analytics’ full potential as they continue to develop technology infrastructure and invest in its evolution and use.

Source: Swiss Re