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Survey Report

Believers or day dreamers?: The obstacles that are delaying progress with using data and analytics

2019/2020 P&C Insurance Advanced Analytics Survey Report (North America)

Insurance Consulting and Technology

January 28, 2020

North American insurers expected to be farther along in using advanced analytics to gain a competitive edge according to our 2019/2020 P&C Insurance Advanced Analytics Survey Report. What’s holding them back?

Believers or day dreamers?

This year’s survey responses illustrate that many North American insurers aren’t as advanced with their use of data and analytics as they wanted to be. What is typically holding them back?

Interestingly, there is something of a divergence in responses between technical and executive respondents. Notably, technical employees put far greater weight on issues with resources and resource coordination than executives, who are more likely to assess the primary obstacles as being more associated with data handling and system infrastructure.

Nearly half (45%) of insurers say they suffer from problems with information bottlenecks where people and systems typically need to interact, and there has also been a notable rise in the percentage of companies reporting issues with a lack of sufficient staff to analyze data.

Considering overall responses, the prime culprits haven’t changed since our 2017 survey, although the balance between them has. Whereas physical IT and data handling infrastructure factors were often seen as the main obstacles by many companies two years ago, and certainly haven’t gone away completely, insurers now typically cite relatively bigger concerns about resources and coordination (Figure 6). Nearly half (45%) of insurers say they suffer from problems with information bottlenecks where people and systems typically need to interact, and there has also been a notable rise in the percentage of companies reporting issues with a lack of sufficient staff to analyze data.

Figure 6: What are the three biggest challenges preventing your company from becoming more data-driven (2017/2019)?

As to who does the work, most companies rely predominantly on their actuaries for advanced analytics (Figure 7), outnumbering data analysts in overall headcount by a ratio of 2:1.

Figure 7: Current staffing mix for advanced analytics work

A related organizational issue that insurers still need to resolve is the understanding and use of models and analytics in the wider business. The latest survey results suggest that a widely shared, data-driven business culture is still a hazy dream for many. In fact, the share of companies that rate understanding of predictive models outside their modeling team as “very strong” or “strong” has reduced since 2017 from 17% to 12%.

Next steps

Turning dreams into reality

As our latest survey reaffirms, one thing that cannot be leveled at North American insurers is a lack of vision or ambition when it comes to using data and advanced analytics in their businesses. “Dream big or go home” seems to be the dominant mantra. Although, perhaps the last two years have been something of a reality check when it comes to the challenges associated with the scale and scope of previously stated ambitions.

Nonetheless, North American insurers’ expansion and ambitions are valid, particularly when considering the substantial increase in the focus on data and advanced analytics implementation. But they will need to freshen their resolve to get the competitive benefits most are seeking. Some options that may potentially help companies to sharpen their focus include:

  • Maximize internal data utilization. Many P&C insurers routinely collect customer data as part of an application or claim process, which can be of wider value to the business when suitable analytics are run on them. Companies shouldn’t overlook what is readily available.
  • Explore what external data has to offer. Internal data are certainly a potentially rich vein to explore, but consider supplementing it selectively with external data sets to improve results and achieve objectives.
  • Align strategy and analytics. Companies should identify what they believe is core to achieving a competitive edge and steer their efforts and resources accordingly. Avoid getting carried away with analytics for analytics’ sake.
  • Match tools to the job at hand. Tap into the technology that is constantly evolving to enable companies to leverage analytics capabilities in a controlled environment.
  • Review staffing allocation. Companies will get the most from data and advanced analytics with employees who can devote sufficient time to them and develop their skills in the process.
  • Create a flexible road map. Companies should plot a course for how they want to apply data and analytics but remain flexible enough to take advantage of market and technical developments as they arise. Insurers should think of the whole process of enhancing analytics capability as a journey, not a destination.
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