Predictive Analytics: The Key to Profitability

Transcription

1 White Paper Predictive Analytics: The Key to Profitability A white paper on how predictive analytics yields results for insurance companies.

2 As an insurance company, you have likely based estimates and decisions on analyzing data to help predict future events. However, with increasingly available data and faster processing power, more sophisticated algorithms designed expressly for the insurance industry can be used to augment data analytics and speed up processes. Why You Should Care About Predictive Analytics 3 What Can Predictive Analytics Do? 3 How to Use Predictive Analytics to Increase Profitability 5 Harness the Power of Predictive Analytics 7 2

3 Why You Should Care About Predictive Analytics Predictive analytics are the key to yielding better results in an increasingly competitive and highly regulated market. By applying machine learning algorithms to data patterns, insurance companies now have a more powerful tool set to anticipate future outcomes with greater accuracy than ever before. What Can Predictive Analytics Do? The results of predictive analytics for insurance can yield improvements across your entire organization. Whether you are just starting to apply predictive analytics or you are already using it for multiple areas of your business, predictive analytics can help you: REMAIN COMPETITIVE IN THE MARKETPLACE Smart companies are already harnessing predictive analytics tools to select risks and price accurately. Therefore, the gap continues to widen between companies who are maximizing their data insights and those who are being left behind. MAKE DATA-DRIVEN DECISIONS MORE QUICKLY By advancing your analytic capabilities through sophisticated algorithms, you are using current technology to its fullest capability. This enables your team to base conclusions on accurate and reliable analytics and accelerate data-driven decision making. BE PROACTIVE Even while working at maximum speed, your teams may be reacting to issues as they arise. Once in place, predictive analytics enables your team to anticipate issues and make decisions before they become full-blown problems. Monitoring of predictive models allows for proactive action as your business changes. 3

4 CREATE ACCURATE PRICING & UNDERWRITING TOOLS This is where most companies are already using predictive analytics: to better segment their business and develop more accurate pricing. Rely on predictive analytics to a greater degree, and ensure that your company is charging the correct price relative to risk. Giving underwriters a data-driven predictive analytic tool to better select desired risks and achieve greater precision in discretionary pricing creates efficiencies and bottom-line improvement in your commercial lines business. DETECT FRAUD FASTER Fraud algorithms can highlight anomalies in data, increasing the speed in which your claims department can investigate suspect incidents. This reduces the number of fraudulent payouts and immediately improves your bottom line. 4

5 How to Use Predictive Analytics to Increase Profitability With proven models and expert interpretation, carriers are more equipped than ever to make intelligent business strategy decisions that raise revenue and lower costs. Here are some of the ways the use of predictive analytics has been proven to help insurance companies enhance their profitability. TO WRITE OR NOT TO WRITE Deciding which risks to write and which to avoid was once an art. With predictive analytics, it now has science to lend a hand. The use of predictive analytic models can guide a company s decision whether to write a particular risk. Predictive models can include data from various external sources, such as location, weather, crime statistics, previous claims and other touch points that reveal insights quickly as to whether each risk is worth writing. Understanding this data-based result before binding policies can generate significant efficiencies and savings. PROVIDE THE BEST MATCH OF DOLLARS INTO RISK Pricing models help insurance providers segment the market on a detailed level, accounting for numerous interactions of variables. Equipped with this information, insurance companies can develop pricing strategies for their products that reflect the true value of the risk they are covering. MONITOR DOLLARS OUT Insurance carriers can also enhance their profitability by improving the claims handling process. Predictive models help identify and reduce fraud and slow down claims leakage. By relying on predictive modeling, companies can be sure that they re paying claims at the right cost. These tools provide additional accuracy that improves claim assignment to claims adjusters to get the right experience needed for the type of claim, thereby helping with the company s bottom line. 5

6 AVAILABLE TO ALL Many insurance companies lack the capital to support an entire predictive analytics department and therefore feel that this resource is beyond their reach. However, actuarial services companies like Perr&Knight understand the tremendous value offered by these models and provide these services for companies who want to increase profitability and compete on a scale with larger insurance providers. For companies that have never undertaken any type of predictive analytics, we recommend reaching out to third-party support services to discover previously unseen opportunities available through the use of predictive modeling. Actuarial services companies with predictive analytics expertise have extensive experience running insurance models on relevant data, integrating outside data and providing the results in a usable format that clarifies decision making. AN ONGOING STRATEGY For best results, it s very important to note that predictive modeling should be monitored on an ongoing basis. It s not a one-and-done process. Companies should look for early indicators of marketplace change and be proactive about monitoring the effectiveness of their analytics. By staying on top of business fluctuations with regular monitoring, insurance companies can not only increase profitability but can maintain their edge over time. 6

7 Harness the Power of Predictive Analytics Predictive analytics reduces the risk in the risky business of insurance. With the vast amount of data pouring in today, many companies realize the advantage of letting high-powered computers synthesize information with lightning speed. Predictive analytic insurance experts can apply their valuable expertise to give you the data-driven results you need to make decisions. This is not only a more efficient use of manpower, but it frees up your staff to focus decision making on additional profit-enhancing strategies. The power of predictive analytics for insurance is not limited to the pricing and claims handling of the insurance product. Once the correct tools are in place, predictive analytics can improve many other aspects of your insurance company s business. Finance departments can apply predictive analytics to collection strategies. Audit departments can use analytics to prioritize policy review. Marketing departments can use predictive analytics to gauge the effectiveness of communications, increasing marketing ROI. The applications of predictive analytics for insurance can extend as far as the questions you ask about how to advance your business. Learn how to unlock greater results and yield better results with predictive analytics. Call Perr&Knight at (888) x3 or visit to start harnessing the power of predictive analytics. 7