Incorporating predictive analytics requires change management, especially for underwriters using it on a regular basis for risk selection. For those using predictive analytics in underwriting, 68% of insurers have been using it for less than two years, according to Valen’s own proprietary research.
A common concern for insurers new to predictive analytics revolves around the data. If everyone is using the same data, does that mean the results look the same and eliminate any competitive edge?
In order to test this common perception, Valen conducted a study. The purpose was to illustrate how best practices for analytics implementation are designed to achieve specific business goals for each individual insurer, not drive toward a singular goal across insurers. In two separate tests, was a predictive model resilient to direct competitors also using a model? In a head-to-head simulation of competitive models in production, each insurer uses their own model to offer a competitive price.
In a tie result, the policy remained with the incumbent.
In a related scenario, the results identified a similar result. Advanced data and analytics allow insurers to know more about what they insure and make better decisions while enhancing the ability to differentiate from competitors.
What does all of this mean?
This exercise proves that model uniqueness and innovation provide a crucial advantage. We continually emphasize the importance of an insurer’s goals and expertise combined with the innovative use and implementation of analytics. This together helps drive competitive differentiation. The winning combination is an organizationally supported data-driven strategy, that uses predictive analytics as a tool…not a strategy.
ABOUT THE AUTHOR:
Kirstin Marr, CMO of Valen Analytics, has a passion for building companies that invent leading-edge technologies to improve customers’ lives and solve the inefficiencies that exist in traditional marketplaces. As the chief brand advocate for Valen Analytics, she helps pave the way for Valen’s clients to lead the innovation initiatives required to compete in today’s marketplace. Before Valen, she ran business-to-business marketing for internet technology pioneer and market leader, ServiceMagic.com (now HomeAdvisor).
Kirstin has a long-standing commitment to philanthropy and community leadership. Most recently, Kirstin is leading the Insurance Careers Movement coalition, a grassroots initiative of more than 850 insurance organizations raising awareness of what insurance has to offer young professionals. She has been involved in several non-profits focused on Science, Technology, Engineering and Mathematics (STEM) education, among other non-profit causes.