New Orleans — Carriers using advanced analytics in their underwriting, claims and marketing efforts will have a better chance of surviving the current and future state of a softening insurance market, Frank Coyne, chairman, president and CEO of ISO told the 800 attendees in attendance this week at the company’s ISOTech 2007 Connect Conference in New Orleans, La.
Coyne told the group that supply and demand is just one of the factors affecting a softening market, and that carriers across all lines are now looking for ways to remain competitive.
One of those ways, according to Coyne, is the use of analytics, which enables insurers to transform their operations and processes with profound implications for competitive dynamics in the future. These new advances will enable the best of the best to wring even more actionable information out of available data and to tap previously unusable data. But, he predicted, even today’s leading-edge insurers risk falling behind one day if they don’t master both the art and science of predictive technology and apply it along the value creation chain.
“Escalating competitive pressures cut the number of insurers serving the United States by a third in a decade and a half,” said Coyne. “And insurers face a daunting array of other challenges, including the prospect of ever-increasing catastrophe losses. But insurance cycles are nothing new, and success will always require commitment to the core fundamentals—underwriting, pricing, loss settlement and risk management.”
Coyne admitted that, in regard to hurricanes, the year 2007 didn’t hold true to the dire predictions of the past seasons, but emphasized to the insurers that “we can’t find ourselves in a false sense of security. We may still face hurricanes much more daunting than Katrina.”
“Strong execution against the fundamentals will always require transforming vast amounts of high-quality data into intelligent decisions,” the ISO executive said. “But advances in technology and analytics are changing the nature of superior execution against the fundamentals—raising the bar.”
Breakthroughs in technology are transforming the competitive landscape in ways that will benefit some insurers at the expense of others, Coyne said. “To survive and thrive, insurers will need systems capable of analyzing and executing against vast amounts of new and varied information. And they’ll need to connect systems and processes in ways that enable information from each link in the value creation chain to create additional value at other links.
“From product development and marketing to underwriting and rating to claims and reinsurance decisioning, the application of advanced analytics to ever-larger and more detailed databases is transforming business processes and improving decisions,” said Coyne. “Huge changes are just over the horizon for lines ranging from personal auto to workers’ comp. I can’t stress enough that we are at the beginning of a fundamental change in the business of insurance.”
Coyne provided examples of leveraging data collected for one line of coverage and applying it to predictive models of other lines, such as developing predictive models based on address-specific variables in personal lines and applying that data to commercial lines or homeowner’s coverage.
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