David Rush, Deloitte’s head of insurance, said: “Some insurers have prematurely considered themselves to be ‘data-driven organisations’, but their focus isn’t where it should be. Projects are often fragmented and centred too much on generating immediate gains to finance future investment. Whilst this is very important, it is a risky strategy to overlook the long-game and, consequentially, disruptive technologies like blockchain, robotics and telematics, all of which have data and analytics at their core. Insurance start-ups, many of which are analytics based, are growing at speed – raising almost $1.7bn across 173 deals in 2016* – yet insurers are taking a slow, linear pace, meaning they could be left behind.
"Moreover, 40% said there is a lack of senior leadership when it comes to analytics, and, as a result, there remains a limited understanding of the benefits of analytics across the organisation. Only 24% of respondents use predictive analytics to forecast future scenarios and just 3% are using the insights in their automated decisions and actions. This is surprising, given that actuarial science and, therefore, data and analytics, is central to the insurance industry."
Rush added: “Executive sponsorship is needed to shift an organisation’s culture away from basing decisions on gut feel. There are huge opportunities being missed – competitive advantage and avoiding disruption come from being able to predict and act quickly. Traditional mind-sets are holding back some insurers from taking the leap of faith when it comes to making automated decisions and using artificial intelligence.”
Deloitte’s research also found that many insurers have a tendency to focus on building capability in-house rather than partnering with the vast array of external data, technology and talent that’s available today.
Alex Poracchia, insurance analytics partner at Deloitte, commented: “Since insurers are trying to do everything themselves, they are at risk of compromising on agility. Building internal capability is important, but insurers must recognise the benefits that partnering can provide. For example, many insurers feel they cannot start their analytics programmes until their internal data is perfect. In turn, a disproportionate amount of effort is spent fixing internal data, which can be time intensive, costly and often lacking in insights. Instead, insurers could use external datasets that can easily complement their needs and bring benefits to the business.
“There are three key actions insurers can take now to get ahead. First, their focus should be on forward-looking, holistic solutions, as this will help them to better respond to the industry disruption. Insurers will need to think about where they want to be and deliver projects to support those goals, rather than ad hoc bits of analysis that have limited connection to business objectives. Secondly, insurers need to move away from doing everything in-house. While it will be challenging to know when to partner and when to invest, this would enable insurers to move forward in a more agile and innovative way.
Finally, insurers must recognise the importance of shifting traditional mind-sets and the scale of the effort that will be required here. This is fundamental in order to fully reap the benefits that data analytics can provide.”
To view the report click Deloitte’s EMEA Insurance Data Analytics Study
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