Advancing Analytics Capabilities – Eric Besman & Mo Masud
Article Synopsis :
The insurance industry sits on a giant pool of data, however the challenge lies in how best to manage and analyse such vast volumes of data and transform it into a strategic differentiator. Predictive analytics has emerged as a game changer in this field and presents tremendous opportunities for insurers to foster their competitive advantage.
In the thought leadership report “Advancing Your Analytics Capabilities”, Eric Besman and Mo Masud provide a broad perspective on the emerging trends in predictive analytics. They also discuss the changing role of the actuary and put forward a framework for developing a sustainable analytical capability. The report concludes that building a high performance internal analytics team is the foundation for sustainable analytics capabilities and that insurers should look for the following skills whilst building the team:
- Data skills
- Analytical skills
- Business skills
The report contrasts the traditional roles played by actuaries with the new emerging role they will play and details the analytics process flow that will include:
- Analytics Requirements and Design
- Analytics Development
- Analytics Testing and Refinement
- Analytics Deployment
The report also highlights common pitfalls that insurers need to avoid while working on developing an analytics capability:
- Pay attention to data credibility and avoid thinning out data.
- Realize that disruption will take on a whole new meaning because of existing Countrywide Models.
- Design a flexible rules based implementation approach to support running two models potentially for a given state or running different models for different states.
- There will be overlap in variables between the Countrywide and State specific models, but they should not be identical. Otherwise you could have just calibrated your Countrywide Models on individual State data.
- Rules to support price tempering will be essential to avoid market disruption.
- Territorial variables and other model design considerations such as capping large losses, etc. should be state specific.
Link to Full Article:: click here
Digital Insurer's CommentsDeveloping smart analytics capabilities and solutions will be critical for insurers in the future. The key lies in using data to enable strategic business application. In order to fully realise the benefits, insurers must embed analytics insight at the point of decision making. Predictive analytics has applications across the insurance value chain and it’s crucial for insurers to understand its potential beyond customer insight. Predictive analytics can also help insurers in:
- Data driven decision making
- Fraud detection and risk mitigation
- Predictive underwriting
- Cost optimisation
Link to Source:: click here