Predictive Analytics: How it Impacts Insurance Industry
If there is one thing you know about the insurance industry, it’s that it is highly susceptible to risk. And to deal with the inherent risks as well as other challenges, this industry has long relied on mostly manual tools to gather and analyze data to drive their decision-making processes. Unfortunately, such manual means have proven to be ineffective, especially when compared to what some of the modern tools are capable of doing. Predictive Analytics has carved a niche for itself among insurance companes among all the tools at the disposal for the industry. What it does is accumulate data from different sources and then use it to foretell customers’ behavior.
That’s the most basic definition, of course, but you get the drift. Interestingly, a recent Willis Towers Watson study found that a majority of insurance companies, over two-thirds to be precise, rely on predictive analytics to bring down their underwriting expenses and other relevant issues.
It is only one aspect of how predictive analytics has been aiding the insurance industry, i.e., there are several other ways that this advanced tool contributes to the sector. Some of them have been listed below.
1. Identify fraud risk: Fraud is one of the biggest challenges the insurance industry has to contend with. In fact, according to some estimates, the insurance industry loses as much as $80 billion every year to fraudulent claims. And this is just the US. It is explicit that such claims are a problem — a problem that can be effectively dealt with via the use of predictive analytics. It enables companies to determine any instances of fraud even before they happen. And it also allows companies to implement corrective measures post factum.
2. Predict trends: Trends and their usefulness is not limited to industries such as the fashion industry. What this means is that even the insurance industry stands to benefit from trends like any other industry. Also, it often enables you to get ahead of their rivals in the industry. However, to stay ahead of the curve, one has to foretell these trends — and you know what can help with that? Yep — predictive analytics; it can be leveraged to design new products, adapt business strategies, and deliver substantially improved customer experiences
3. Deliver tailored experiences: No matter the industry, the new-age customer now expects an experience tailored to their needs and preferences. Insurance companies can do this, too, thanks to predictive analytics, which can make use of data collected from various sources, including IoT devices to deliver insights about customers’ needs, requirements, etc.
Insurance data analytics may still seem like a somewhat novel concept in the insurance industry, but, as evidenced by the above discussion, it has much to offer to companies operating in this domain. So, if you, too, wish to achieve these benefits and others such as cost savings, high efficiency, and more, we recommend getting in touch with a trusted service provider right away.
