Data-driven insights key to insurers' decision-making

5%-10% of tech leaders in small groups benefit from data and tech investments.

The insurance industry is experiencing a paradigm shift driven by the massive influx of data from connected devices and digital interactions. Zettabytes of unstructured and behavioural data now flow from various sources like connected cars, houses, factories, and wearable technology, Bain & Company said in a recent insight.

This data, when properly harnessed, can provide significant competitive advantages for insurers.

The primary challenge for insurers is not merely handling more data but effectively tapping into and analysing new forms of data. To do this, insurers need robust AI models capable of processing diverse data formats, such as photographs of auto accidents for claims processing. 

Integrating these insights into core workflows is crucial for making informed decisions. 

Advanced data analytics are challenging to orchestrate with legacy technology systems that cannot handle the high frequency and varied modes of incoming data. Effective orchestration requires treating data as an enterprise-wide asset, accessible across departments with appropriate controls.

However, most insurers face challenges in extracting value from technology modernization, often experiencing long and costly overhauls. Sequencing technology investments whilst balancing cost and profitability goals remains a critical issue. 

Effective modernisation can unlock significant value, as seen in property and casualty carriers achieving higher premium growth, lower expense ratios, and improved customer Net Promoter Scores.

“These technology leaders currently compose a small group. Our analysis regressing the technology dimensions with business performance metrics finds that only 5% to 10% of carriers consistently capture value from their data and technology investments. The great majority of insurers have not realized substantial value from their efforts to date,” Bain & Co.’s “Insurers Can Parlay Technology into a Competitive Edge” said.

Best practices

To succeed in technology modernisation, insurers can follow these principles:

1. Clarity on Business Priorities: Identify and prioritise issues by measurable value.
2. Data-First Approach: Understand data requirements and models before modernizing applications.
3. Investment in Tools and Capabilities: Focus on data alignment with use cases, talent recruitment, cloud adoption, and modular platforms.
4. Orchestration of Initiatives: Set objectives and track results for each initiative, modernizing technology whilst making productive use of data.