Insurers look to analytics tools for answers
- Posted on March 9, 2017
A trio of professors (Ajay Agrawal, Joshua Gans and Avi Goldfarb) at the University of Toronto recently published an article in the Harvard Business Review, entitled, The Simple Economics of Machine Intelligence. They make the point that, “Technological revolutions tend to involve some important activity becoming cheap” and for machine intelligence that will happen with a drop in the cost of prediction. The result will be “using prediction to perform tasks where we previously didn’t.” The article cites reframing autonomous driving as a prediction problem rather than a series of if-then-else statements as an example of tackling problems that did not historically consider prediction input.
A similar line of thinking related to insurance is espoused in a new Analytics in Insurance Perspective published by Strategy Meets Action (SMA). The report starts by acknowledging that because of the actuarial and underwriting components of the business, insurers have always been more data-centric than most other industries. But adding massive amounts of new data from new sources to the large amount of proprietary data means insurers are in a position to use modern analytics tools to solve new types of problems and approach traditional problems in new ways.
SMA lays out a range of questions that insurers are looking to analytics capabilities to address, ranging from traditional, operational questions to more complex and advanced analysis. New and deeper insights can be gained in more traditional areas, like risk assessment and fraud analysis through analytic solutions that offer real-time, interactive and visualized insights. And emerging analytics areas like human augmentation and automated decision making hold the promise to identify and predict new opportunities.
The Perspective finishes off by saying, “Analytic capabilities are rapidly becoming the lifeblood of insurers.” It lists several critical factors that analytics tools must encompass if they are to be effective, including: integration with existing platforms or tools, the ability to scale up and down as needed, and adjusting for future data demands, all with speed and ease.
It’s a tall order and one that many insurance companies won’t be able to handle on their own. Initially, at least, there will likely be a need for experts with the sort of hybrid knowledge and experience that covers both business and analytics. That’s where Avanade can help as we have seasoned insurance industry experts and a broad, cloud-based platform for analytics to support the needs of the modern digital insurer. Our capabilities include a range of BI and analytics solutions, from digital analytics strategies to delivery of solutions.