Risks Are Out of Focus Without Predictive Analytics
Andre Nieuwendam | July 27, 2015
We are, by definition, creatures of habit. That being said, if you haven’t given predictive analytics a first look as it applies to your corporate strategy in the near future, it may be time for a second look. While many companies have yet to unravel the full value of what predictive analytics will bring, it is important to remember the hazy view in the crystal ball of analytics will become clearer as predictive analytics becomes a bi-directional interaction between the consumer and the business.
Eric Siegel, an expert in the area of predictive analytics, refers to the science in simple terms. Predictive analytics will put the power to determine if a single person will click, buy, lie or die in the hands of the analyst. Understanding consumer behavior and empowering companies through predictive analytics will enable them to gain valuable insights, which will drive operational efficiencies to a whole new level.
Commercial and personal auto carriers have a significant jump on the Property & Casualty market due to the interaction between telematics devices and a car’s onboard computer and diagnostic systems. These interactions have allowed auto carriers an unfettered view into the driving habits of every single insured and capture vast amounts of data from the car’s onboard computer and transmit them to the device.
As a result, drivers who drive responsibly will see significant discounts in premium while less responsible drivers will be penalized in the form of increased premium with decreases in coverage. But this data is barely scratching the surface of what we will see in the next five years and beyond.
As cars are being equipped with more “smart” technology and wireless broadband is becoming less of a luxury and more of a standard feature, cars will begin to collect meaningful information about a driver’s habits. These two way interactions will be recorded and run through complex algorithms to categorize certain aspects of a driver’s behavior. All this data will be available to the insurer and the cars manufacturer, all to the benefit or detriment of the driver or drivers. As an example, a parent may get notifications about a teenager’s whereabouts and how fast the teen is driving.
At the same time, homes are becoming increasingly intelligent. A large online retailer recently released its first interactive concierge for your home, a wireless and Bluetooth-enabled computer and sound system with a soothing female voice and an equally elegant name that interacts with the user through their web-enabled retail account.
The online retailer also created a line of “smart” home products that can interact with and be controlled by a central device at the command of your voice. These devices provide measureable analytics around a person’s home behavior, and as a person interacts with the controller, the controller learns more about their habits and provides the information to the retailer via the controller. They can now use these analytics to determine and ultimately predict every customer’s behavior as they interact with the many enabled devices in their house.
An example of this would be a family that has an alarm system, but never asks the controller to enable it. The controller will gather information about the human interaction through behavior it is able to monitor through these devices.
As more and smarter houses come online. Digital Trends, a technology blog, estimates the number of technology-enabled homes will total 70 percent of the projected U.S. homeowner’s market vs. Europe, where currently 2.7 million homes are fully smart-technology enabled.
Bi-directional interaction will provide instantaneous access to consumer behavior that can be used to influence a consumer’s buying choices, but will help carriers determine targeted rates, discounts, and premiums as well as offering ala carte do-it-yourself policies based on what the consumer needs instead of baked-in coverages.
While analytics will become increasingly more complex, cloud-based solutions and cheaper hardware are making predictive analytics a cost-effective method for accurately predicting consumer behavior and also analyzing trends in your book of business.
As data becomes increasingly larger and more invasive in our lives, companies need to be poised to start looking at cloud or infrastructure that will scale to meet the rising demands of the engines needed to run the analytics and crunch them into actionable reports and meaningful data that will ultimately decide underwriting, rating and product development.
In the next five years, bi-directional interactions with intelligent technology will increase 100-fold. It is clear that with the growth of technology, data will be more actionable than ever.
So if you are not thinking heavily about predictive analytics and data modeling as part of your immediate future, I only have one question. Do you feel lucky? Do you?
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ITA is pleased to present the 2014 Webinar Series. We have many topics for you to choose from and attendance is open to all ITA members. The webinar topics are current and exciting — ranging from predictive analytics to telematics and will focus on the direction insurance carriers need to follow for the future. All webinars are presented by insurance IT professionals along with some of the leading analysts and consultants in the field. There is no cost to attend an ITA webinar. For more information and to register for the webinar, click the “title” of the webinar below.
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