A global pandemic, natural catastrophes, geopolitical risks, and macroeconomic risks, coupled with recessionary market sentiment, have created an extremely uncertain environment for insurance enterprises.
While Life and Annuity (L&A) insurers remain positive following the pandemic, inflation continues to be a looming threat for Property and Casualty (P&C) insurers globally.
Insurers across the board are looking for ways in which they can navigate these overarching challenges – divesting business units to focus on core competencies and geographies, consolidating vendor portfolios, and investing in digital transformation initiatives. As insurers navigate through this period of uncertainty, they need to tap into the vast data pools they possess to unlock value and succeed.
Everest Group estimates the massive economic value insurance enterprises can generate by tapping their vast data pools to achieve operational efficiency and drive premium growth. By investing in becoming data-centric organisations, insurance companies can unlock a collective economic value of US$874 billion.
This potential lies in the impact data and analytics can have in helping organisations increase operational efficiency (US$306 billion), reduce claims leakage and fraud (US$117 billion), and achieve premium growth in the Property & Casualty (US$285 billion) and Life & Annuity (US$166 billion) sectors.
“Insurers today are challenged by an environment of high uncertainty that includes natural disasters, geopolitical and macroeconomic risks, the repercussions of a global pandemic, inflation and the looming threat of a recession,” said Ronak Doshi, partner at Everest Group. “Nevertheless, they can unlock immense value and come out on top by investing in data and analytics.”
Everest Group has documented how insurers can use data and analytics to achieve cost savings from increased operational efficiency, reduce claims leakage and fraud expenses, and drive premium growth by unlocking higher sales efficiencies and rapid product innovation.
“We estimate that collectively the industry could tap up to US$874 billion in value by investing in a data-driven approach,” said Doshi.
Currently, insurers’ data and analytics spending is growing at an accelerated rate of over 25% annually. The spend is being directed toward the digital transformation of business operations. Key priorities include:
- Modernising the data estate (especially, eliminating data silos and storing customer data in a governed data lake), enabling a single view of customers across ecosystems.
- Redesigning operations to infuse data across workflows to enable enterprise-level, data-driven decision-making capabilities
- Leveraging cloud-based analytics and AI/ML (artificial intelligence/machine learning) tools to process large data volumes for more effective risk assessment, building hyper-personalised products, and improving agility to respond to customer demands.
- Building focused solutions to extract value from existing data, especially to build value-added products and services and minimize loss ratios.
These improvements will lead to value creation across five key areas:
- Product and experience innovation
- Minimization of claims payout
- Enhancement of operational efficiency
- Reduction in fraud abuse and claims leakage
- Revenue growth
