Stuart Rose, Global Insurance Marketing Director at SAS, said insurance companies can increase profits by utilizing analytics across five business areas: Actuarial, Claims, Customer, Channel and Risk.
The Society of Actuaries has recently posted a number of interesting articles on the use of predictive modeling in life underwriting and quantifying mortality risk. Towers Watson reports that predictive modeling for rate accuracy for Property and Casualty Insurers has increased to 98% in 2014 from 68% in 2009.
Claims disbursements and loss-adjustment expenses are by far the biggest expenses for a P&C company. The use of predictive modeling for the calculation of loss ratios has increased from 57% in 2009 to 91% in 2014.
Customer and Channel
Embracing the concept of lifetime value for a customer helps insurance companies market to customers and benchmark how much they should be willing to invest to acquire and retain a customer. Predictive analytics can provide a deep-dive into causal factors before KPI falls below an acceptable rate. Towers Watson reports, “While less than 30% report they are currently using predictive models to (do)….target marketing, an additional 36% anticipate doing so over the next two years.”
Rose of SAS says, other risks such as market, counterparty default and operational and liquidity risk should be factored into the profit equation. Effective enterprise risk management requires integrated analytics and software embedded into the company’s everyday processes. Utilizing predictive modeling for profitability calculations has increased from 57% in 2009 to 87% in 2014 per Towers Watson.
Sheri Scott, Principal and Consulting Actuary at Milliman, said it best on a panel for the SOA, “The actuary is going to understand the business, and will ensure the data and findings are used in an insurance appropriate manner, but the data scientist will challenge the norms and create innovations. Although actuaries could serve both roles, each team member should contribute and challenge each other. The mix of backgrounds enhances the team.”
Executive Recruiter at Smith Hanley Associates, Rory Hauser, is able to bridge the need for data scientist and actuaries with our insurance clients. Call him at 203.319-4300 or firstname.lastname@example.org to discuss your hiring needs or your job search.