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Underwriter Adoption Cited as Biggest Concern in Survey by Valen

Staff Writer | April 17, 2015

Valen Analytics announces their findings from a survey conducted at the second annual Valen Analytics Summit in March. Based on responses from 39 P&C insurance executives, predictive analytics usage is becoming considerably more commonplace among insurers, with 45 percent implementing predictive analytics in the last two years, and more than half (56 percent) planning to start within a year.

The Valen event was focused on the increasingly rapid adoption of data and analytics within insurance companies combined with the potential impact from technology companies entering insurance. Featured keynote addresses included Andrew Rose, CEO of Compare.com; Matthew Mosher, senior vice president of ratings services for A.M. Best; and many other C-level insurance executives in the P&C industry.

The survey shed light on the fact that there is still lingering hesitancy to utilize predictive models within their business. Most of the respondents (82 percent) expressed underwriting adoption as a ‘significant’ or ‘high concern’ when deciding to implement predictive analytics. Insurance executives pointed to the top two pain points expressed by underwriters: They believe that their experience is more valuable than a predictive score when assessing risk (24 percent), while a quarter are concerned that predictive analytics will replace their jobs entirely.

“The need to implement predictive analytics in underwriting is becoming more widely recognized by insurers, but these findings show why organizational buy-in is key to its success,” says Dax Craig, CEO of Valen Analytics. “In order to achieve predictive modeling goals, underwriters as well as actuaries, executives and training teams need to be a part of the discussion pre-implementation, and be educated on how the model will be making their jobs easier,  more efficient and effective.”

When asked about which areas of growth insurers are most focused on, respondents cited ‘new distribution channels’ as the top priority, followed by ‘expanding new territories’ and ‘new products/lines of business.’ Of the respondents, 75 percent also believe that technology companies such as Google will disrupt distribution channels in a significant way, with only three percent believing they will have little to no effect on agents.

 

Other key findings from the 2nd Annual Valen Summit include:

  • 75 percent rank loss ratio reduction as the top result they need from underwriting analytics.
  • 81 percent believe that predictive analytics has a moderate to significant impact when their underwriting performance is being evaluated by ratings agencies like A.M. Best, Moody’s and Fitch.
  • 39 percent do not believe their company is doing an effective job in presenting their underwriting strategy and results to rating agencies. Only 19 percent believe they are doing an effective job.
  • 61 percent believe that technology companies will begin impacting commercial lines within the next five years.
  • 68 percent say they face a talent recruitment issue, finding it difficult to enlist the caliber of candidates needed to fill key positions.

“Concerned about adverse selection and inadequate pricing, an increasing number of carriers are investing in tools to help them make better decisions as they focus on growing their book of business,” says Karlyn Carnahan, research director of Celent.  “However, successful implementation of predictive analytics will require not just tools, but an emphasis on leading the organization through change management. This requires a mix of cultural and organizational focus along with technical acumen.” 


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