Legacy systems and the state of their data, is a challenge for
many life insurers, but so is inertia, according to Mark Bread-
ing, a partner in Strategy Mets Action and author of a new
report, “Data and Analytics in Insurance: L&A Insurer Strategic
Priorities and Operational Plans Through 2016.”
“They have tools and techniques that have worked in the
past and there is always some reluctance to change and adopt
new things,” says Breading. “Maybe the biggest thing that has
held back life insurers from fully leveraging analytics is not the
technology, the data or the analytics tools; it’s really more about
the people. That’s a big challenge for the industry.”
Insurers can analyze any part of their business with all
kinds of new data and analytics tools that can be brought into
the analysis, but carriers need to have people that know what
questions to ask, what tools to use, and a knowledge of how to
interpret the data and turn it into action, according to Breading.
The talent is there, but it’s a competitive environment, both within the life insurance industry and the business world in general.
“There are smart people in the life industry, but every industry is out there looking for talented
analytics people,” says Breading.
Analytics are viewed by many
as the key to being competitive.
Competitors gain a better understanding of their customers and
use that knowledge to create new
products, analyze every part of
their business, and ponder ways to
do things differently.
“It’s not just life insurance or
insurance as a whole; the ana-
lytics wave is sweeping across all
businesses and industries,” says
Breading. “Senior executives see the potential, understand they
need to invest, and are being aggressive to build up this capabil-
ity and take advantage of what is available.”
Business intelligence tools have been around for a long time
as have modeling tools, but on the advanced analytics side there
has been great movement in terms of better, and easier-to-use
tools for things like data mining, explains Breading.
“There are solution providers out there with talented people
that know how to build models to address specific questions,” he
says. “The models are modern, run faster, and are slicker.”
With more solution providers in the market, there is more
competition, particularly with the move to the cloud. Breading
Get the Lead Out
The use of analytics among life insurers won’t improve until the analysts do.
Changes in Spending for Data and
Analytics Among Life/Annuity
Source: SMA Research
K Increase by 1-5
percent per year
K Increase by 6-10
percent per year
K Increase by
over 10 percent
believes this has made it easier for midtier and smaller insurers to
hop on the analytics bandwagon with more sophisticated tools.
“Even smaller companies are using predictive models, but
they may not have a large stable of models and a team to man-
age things,” he says. “It’s a matter or scale.”
Breading maintains the biggest area of focus today concerns
anything that pertains to the customers, such as marketing and
distribution. Insurers use analytics to try and understand cus-
tomer needs, customer behavior, and customer interactions.
They also look to analytics to understand the performance
of agents and producers as well as the performance of different
products in the marketplace.
Life insurance distribution is complex and there is potential
to dig deeper and look beyond the top line information, points
“Which organizations are we selling through, which producers
are the most profitable, which have the most potential for growth,
and which are the ones we should no longer focus on?” asks Breading, rattling off a series of concerns among carriers.
For now, most of the analysis is being conducted at the company level and they use that to determine products, which agents and
producers they want to work with, and how they can improve their
offerings and interactions with customers, explains Breading.
“There is not a lot of information sharing with producers
other than running analytics to identify prospects,” he says.
“They are sharing that with producers, but on both the producer side and the insurer side they have a lot of information they
keep to themselves.” ITA