More Than 80% of P&C Insurers are Increasing Data Investments

Eighty-three percent of P&C insurers indicate that they will increase their spending over the next three years. The top three areas for investments in analytics, according to SMA’s data, “remain the risk-centric areas” of product development, underwriting and claims.

Seventy-five percent of the 126 P&C insurers that participated in the survey are anticipating an increase of spending as of last year, which indicates most industry participants increasingly view analytics as a competitive differentiator.

Overall, 43 percent of P&C insurers plan to increase spending by at least 6 percent per year through 2015, including 16 percent who anticipate increases of 10 percent or more per year, according to the report "Data and Analytics in Insurance: P&C Plans and Priorities for 2013 and Beyond."

The top customer insights insurers are looking to glean are renewal/retention triggers, which is much more important for smaller insurers according to the results, as well as real-time cross-sell/up-sell opportunity identification. Meanwhile, productivity measurements and loss trends were cited as the most valuable operational insights.

According to insurer respondents, the five biggest barriers to capitalizing on analytics are data quality/completeness (67 percent of large insurers, 46 percent of small), lack of overall priority or funding (48 and 37 percent, respectively), data accessibility (48 and 20 percent, respectively), legacy core systems (41 and 36 percent, respectively), and lack of skills and experience (33 and 44 percent, respectively).

The report says insurers invest about 9 percent of IT budgets on data and analytics. Furthermore, top-tier insurers are spending much more (14.9 percent) of their IT budgets on analytics, while tier-4 insurers (less than $250 million in direct written premiums) are spending below the average (7.1 percent). Overall, while nearly a third of insurers (31 percent) are spending less than 5 percent of their IT budgets on data and analytics, 15 percent of P&C insurers are spending more than 15 percent of their IT budgets on data and analytics.

In terms of the capabilities P&C insurers are spending on, predictive models lead the way for both personal and commercial insurers, followed by predictive analytics and data/text mining.

Among areas of the enterprise receiving data and analytics investments, product development saw the biggest jump from 2012 to 2013, from 51 to 66 percent of insurers indicating investments; meanwhile, underwriting fell slightly from 72 to 70 percent, as did claims (from 51 to 48 percent). Marketing rose from 42 to 47 percent from 2012 to 2013, pulling almost even with claims.

SMA asserts, overall, that insurers are investing in data and analytics across the enterprise—and the bigger the insurer, the more investments they are spreading across the enterprise. Significantly higher percentages of large P&C insurers are making data and analytics investments in product development, distribution management, underwriting, policy servicing and claims. In the rest of the business areas listed, small P&C insurers are found to be making investments at a pace equal to their larger counterparts.

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