Life insurers to make huge investments in predictive analytics capabilities

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The life insurance industry in the Americas is expected to dramatically increase investments in predictive analytics capabilities within the next two years, according to the new Life Predictive Analytics Survey from risk management, insurance brokerage and advisory company Willis Towers Watson.

The firm surveyed 51 life insurance carriers, totaling more than $138 billion in annual premiums. It found that within the next two years, all large and midsize carriers will use predictive analytics in their group life operations, while nearly half of small insurers will deploy similar capabilities.

Currently, approximately 70 percent of large insurers are deploying predictive analytics in the areas of individual life and group life. By mid-2021, 90 percent of large insurers will use predictive analytics for individual life, and a full 100 percent will use for group life.

More small- and medium-sized life and annuities insurers will also increase their predictive analytics capabilities significantly in individual and group life, retail individual annuities and institutional annuities, the survey revealed.

“Tellingly, life insurers that have already deployed predictive analytics have realized productivity gains,” notes the report. More than two-thirds of participants said that predictive analytics has already helped reduce underwriting expenses. Sixty percent credit the additional insights for increases in both sales and profitability.

Respondents identified two key drivers for investment in predictive analytics. Of the highest importance is meeting competitive pressures in product development and pricing, as well as customer relationship management.

Surveyed companies said that in order to achieve these two objectives over the next two years, they would need to offer faster service (cited by 84%), more personalized experiences (cited by 71%), faster and easier access to policy information (cited by 64%) and more mobile-friendly interactions (cited by 58%).

While life insurance firms project that they will expand their analytics use across all core functions, using analytics to improve underwriting is a priority for individual life carriers. A full 92 percent of these insurers plan to use predictive analytics within the coming two years, while only about half are using analytics now.

Life and annuities insurers also are planning to expand their use of predictive analytics to improve the claims experience. Currently, a third or fewer life and annuities insurers are using predictive analytics for claims management. However, carriers are seeing the promise of the technology in improving claims.

Only 10 percent of individual life and institutional annuities insurers are using predictive analytics to support the claims process, but in two years, it is projected that 40 percent of individual life carriers and 55 percent of institutional annuities carriers will use the technology. Now, 37 percent of group life carriers are employing predictive analytics, but in two years, a sizable majority (87%) of survey participants said they were planning to deploy the capabilities.

“Our survey demonstrates the rapid progress that life insurers in the Americas expect to make with predictive analytics over the next two years. It seems that many life insurers are on the cusp of a real transformation in the core functions of their business,” says the survey report.

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