Today insurance companies are attempting to improve the bottom-line by containing cost which has very limited scope. While continuing driving the cost insurer must focus on innovative product pricing which is more market driven than the regulator. Some of the product segments are highly price sensitive, especially motor segment; profits are eroding and it has become practically unsustainable business if not for the size.
However, with the ‘internet of everything’ and ‘social media’, insurance players can look at innovative pricing strategies and products if they adopt analytics. For example, there are multiple sensors and GPS devices that are fixed to vehicles today that gives much information related to vehicle performance, speed, braking and accelerometer information on acceleration. This information gathered and analysed with the right algorithms, can throw up data on driving habits & vehicle performance that can be used by insurance companies to determine a usage based pricing formula, risk based pricing or to introduce new innovative products. Life insurance and personal non-Life insurance can look at achieving competitive pricing as well as new markets with the use of Analytics. The same goes for the Property & Casualty (P&C) sector which can get some extremely critical data from the multiple government agencies to evaluate and ensure right product pricing.
Analytics has added precision to actuarial work, which in turn has resulted in more accurate pricing through overall risk assessment. With the help of Predictive analytics, Actuary can evaluate extremely large amounts of data more quickly and perhaps incorporate data elements that previously were not available or were not considered to be relevant in the assessment of loss cost. Advancements in predictive analytics could also mean instantly levelling the playing field – simply by adopting an off-the-shelf analytic solution available in the market.