The use of increasingly advanced analytic capabilities is enabling property and casualty (P&C) re/insurers to “unlock new frontiers in risk assessment and mitigation,” according to a new sigma report from Swiss Re Institute.
The study explored how insurance and reinsurance companies can use analytics to support growth through new market opportunities and risk pools, as well as better customer comprehension.
Swiss Re also highlighted how advanced analytics can provide insight on risk accumulation and portfolio steering, and how they can improve efficiency by automating manual and repetitive tasks.
Utilised in these ways, most re/insurers seem to be targeting around a 2-5% improvement in their loss ratios, the report estimated.
However, analysts cautioned that this potential will only be realised through a co-ordinated effort between developers and users, while adoption could be limited by the expectation of success in all projects.
Challenges also remain in the form of legacy systems, traditional mind sets and scarce talent at the intersection of data science, risk knowledge and technology.
Despite this, Swiss Re anticipates that spending on data and analytics will rise within static IT budgets, as more re/insurers complete core systems updates over the coming years and seek out differentiating capabilities.
“The ability to gain useful predictive insights from ever-increasing amounts of data is challenging. There needs to be more investment of time and resources on data curation,” said Daniel Ryan, Head of Insurance Risk Research at Swiss Re Institute.
“Many new data sources are not created for insurance, and owners of the data may neither understand insurance nor what needs to be done to make the data usable for insurers,” he added.
Eric Schuh, Global Head of P&C Solutions at Swiss Re, also commented: “The time taken to implement P&C Solutions projects depends on the Lines of Business and project objective, but several weeks is the minimum time for rapid deployments.
“Wider business integration and extracting larger scale efficiencies can take longer, P&C Analytics, part of the P&C Solutions suite, can also integrate other solutions into its projects for added client benefits.”
Swiss Re concluded that the successful implementation of analytics projects will start with re/insurers asking the right questions about value proposition and data sources, such as how to identify areas where analytics generate tangible value.
One useful framework to determine the value of projects, the report proposed, would be to evaluate them across factors such as desirability, feasibility and viability, with initial focus on areas that have high potential across all three fronts.