"The insurance industry is maturing," says Mark Gorman, CEO and founder of The Gorman Group, an insurance business-analytics and integration consultancy. "And we're seeing insurers move from analytics done at a bottom up level — for pricing precision, or for fighting fraud — to more of a corporate capability and competence. And, they're applying it much more broadly."
Gorman isn't alone in this observation. A number of industry analyst firms' research echoes the increase in analytics focus: Novarica says insurers report significant value from big data/analytics investments in underwriting, claims, marketing and service. And, Strategy Meets Action's research indicates a majority of P&C insurers will increase their analytics spending, on product development, underwriting and claims, over the next three years.
With all of this change, analytics was at the top of the editors' lists for the top trends for 2014. However, as the discussion continued, analytics kept creeping its way into all of the other five identified trends:
Cloud: Cloud providers and technology providers offering products in the cloud are focusing on the analytics capabilities they need to supply.
Internet of things: As more objects become data sources, the need for analytics to make sense of it will become more urgent.
IT talent: The need for data professionals is greater than ever before, as insurers begin to extend analytics to the enterprise.
Regulation: Insurers continue to use predictive analytics to accurately price risk, while complying with regulatory guidelines.
Social collaboration: Consumers are creating valuable data that can drive marketing, underwriting and claims decisions, and could become a strategic differentiator.
"Analytics resources will be increased in 2014, he says. "It doesn't matter how big the organization is; what matters is how the senior management is focusing on analytics. It's still deployed on a functional basis, but the mindset and cultural needs to shift to more of an enterprise initiative."
"In the years to come, for the insurers that are very focused and deliberate in their analytics strategy, there is still plenty of opportunity in the market to get first-mover status and leverage innovation," Gorman says.
And much of the innovation can start with the following five trends:
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