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Article: Analytics Poised to Disrupt Entire Insurance Value Chain | Insurance Tech

Many insurers have embraced analytics and have made great strides at leveraging data and analytics to solve pricing issues. However the industry has largely ignored other opportunities to increase customer engagement and loyalty and have missed lessons from other sectors that have successfully used analytics to drive the revenue side of the equation.

The insurance industry stands at an analytics crossroads. One path leads to the status quo, the other to improved decision making, more effective marketing strategies and the ability to better understand, predict and influence consumer behavior.

The reality of today’s insurance marketplace resembles a Hobbesian, dog-eat-dog world where companies are competing for a finite pool of possible customers. It’s a zero-sum game where growth strategies are largely built upon a company’s ability to win business from competitors and defend against similar incursions into its own market share. The main weapon in this battle has traditionally been pricing – and this is precisely where those insurance companies that leverage Big Data and analytics focus their efforts, often to the exclusion of claims, products, agents and sales operations, among other areas.

However, while insurance companies historically spend a lot of time and effort on pricing, that doesn’t mean the industry as a whole is where it wants to be. For example, if a 35-year-old married mother of two from a mid-sized American city asks for an auto policy quote from five different companies, her premium could vary from $600 to $2,000 for a six month period. All the underlying characteristics are the same – she’s the same person, same age, living in the same city, with the same number of kids and the same driving record – but her price options can be all over the place.

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