The latest sigma report from the Swiss Re Institute (SRI), the research arm of ICMIF Supporting Member Swiss Re, suggests that technology advances are enabling non-life (P&C) insurers to unlock new frontiers in risk assessment and mitigation thanks to advanced analytics.
Past successes that focused on improving expense ratios have catalysed new investment with pilots by insurers showing meaningful improvement in loss ratios, as insurers gain better visibility into underlying loss drivers. True potential will only be realised through co-ordinated efforts between developers and users, although expectation of success in all projects could limit adoption and constrain a virtuous circle of trial and improvement.
“Most insurers aim for a success rate of one-third in operationalising pilots. Too high a success rate may mean that the use cases are not challenging enough”, says Daniel Knüsli, Swiss Re’s Head P&C Analytics, P&C Solutions.
Exploring the opportunities for advanced analytics
Advanced analytics will undoubtedly make an impact along the insurance value chain. Challenges to success remain in the form of legacy systems, traditional mind sets and scarce talent at the intersection of data science, risk knowledge and technology. Despite this, the Swiss Re Institute expects spending on data and analytics to rise within static IT budgets, as more insurers complete core systems updates over the coming years and seek out differentiating capabilities.
Advanced analytics should be considered from the perspective of business capabilities rather than technologies.
These include how to enable growth by using analytics to achieve an in-depth understanding of new market opportunities and new risk pools; how to better comprehend and influence customers; how to gain insights on risk accumulation and portfolio steering through linking existing portfolios with orthogonal external datasets; and how to improve efficiency by automating manual and repetitive tasks that take up valuable time for underwriters and claims managers.
Advanced analytics pilots across several lines of business do indicate healthy loss ratio improvements but for various reasons, results in real- time trading conditions may vary. All told, most insurers seem to be targeting around 2-5% improvement in loss ratios under real trading conditions.
“The time taken to implement P&C Solutions projects depends on the Lines of Business and project objective, but several weeks is the minimum time for rapid deployments. Wider business integration and extracting larger scale efficiencies can take longer, P&C Analytics, part of the P&C Solutions suite, can also integrate other solutions into its projects for added client benefits”, says Eric Schuh, Global Head of P&C Solutions at Swiss Re.
Upcoming ICMIF webinar: Advanced analytics: unlocking new frontiers in non-life insurance
ICMIF will host a webinar based on the findings of this industry-leading research on Monday 9 December 2019 (9am GMT/UK time). In this webinar, author of the report Jonathan Anchen, Head of Swiss Re Institute Research and Data Support, and Christian Elsasser, Senior Risk Analytics & Emerging Solutions Manager, will share their insights on the potential of advanced analytics in driving P&C insurance business growth, including:
- Change and digital transformation: the growth of analytics in insurance
- Areas of applications and considerations
- Opportunities and use cases in non-life insurance.
For more information and to register for this webinar, please click here. Note that this webinar is exclusively for ICMIF members.
ICMIF members wishing to obtain a full copy of the sigma No 4/2019 report, “Advanced analytics: unlocking new frontiers in P&C insurance“ can download this from the Swiss Re Institute’s website. The report is available in English, French, German, Spanish and Japanese.