▷ Only a few insurers derive competitive advantages from data

27.01.2022 – 09:30


Berlin (ots)

Only four in ten insurers describe their pricing and underwriting as data-driven

In an increasingly volatile market, insurers are increasingly relying on data to adequately identify, assess and manage risk: 40 percent of insurance companies are using data to open up new markets. 43 percent of insurers have updated and further developed their risk algorithms based on data. This emerges from the new study “The data-powered insurer: Unlocking the data premium at speed and scale” from Capgemini Research Institute out.

The importance of data is growing – especially with risks such as the climate crisis, global economic turbulence and technological advances, for example in autonomous vehicles. Insurers with real-time data sources such as telematics, wearables and social media data will be able to meet rising customer expectations for convenience, personalized advice and dynamic pricing. They are very well positioned in their competitive environment and can compete with InsurTechs that are able to gain individual insights. We refer to these insurance companies as Insurance Data Masters. More than 90 percent of them report increased premium income, an improved combined ratio and stronger net promoter scores. This applies to only half of the other insurance companies. Data masters differ from the rest in three key ways: 92 percent have a centralized governance model, 62 percent work with insurtechs, and 97 percent have created open application programming interfaces (APIs) to allow third parties access to their data.

“Traditional insurers must increasingly expect competition from InsurTechs, BigTechs and manufacturers”says Dr. Joachim Rawolle, Head of Business Technology Solutions for Banks and Insurance at Capgemini. “In order to remain competitive, they need a data-based approach that helps them maintain market share, improve key figures and create precise risk analyses. The big insurers are pioneers in this, while many smaller companies still have the necessary prerequisites in their IT landscape have to work for it.”

Insurers use data to grow profitably

According to the study, insurance companies use data to

  1. Designing new products and solutions
  2. To develop services with added value, to intensify the interaction with customers and to bind them more strongly
  3. to enable comprehensive insights into risks and their underwriting assessment.

More than 40 percent of insurers are using data to enter new markets, shift their focus from protection to prevention and reconsider their actuarial assumptions. In addition, 43 percent of them use real-time data to update actuarial models, while about a third use data to model new risks.

Many insurers make a targeted decision to make further investments in data – for example in modern risk algorithms that quickly visualize data in decision-making situations and include a large number of data sources. Around 43 percent of insurers have updated and further developed their risk algorithms in the last two years. As a result, around 39 percent of insurers can describe their risk selection and pricing as fact and data-based.

Larger insurers are leaders in data-driven processes

Only 18 percent of insurers have both the technological competence and the corporate culture and behavioral patterns to successfully use data-driven programs and to gain competitive advantages from the growing data volumes. These ‘Data Masters’ are significantly larger than their competitors. Most of them generate sales of over 20 billion US dollars.

Additionally, 61 percent of these large insurers have implemented data initiatives across multiple lines of business or even achieved significant transformation successes in terms of competitive advantage, market share and other metrics. Among the smaller insurers, this applies to only 16 percent. A key reason for this gap could be that smaller companies underinvest in technological modernization and struggle more often than large insurers with the challenges of legacy systems and monolithic architectures.

Data Masters differentiate themselves from their competitors in the insurance industry in a few key areas: Almost all (97 percent) have created application programming interfaces (APIs) to allow external organizations access to proprietary data – compared to only 36 percent of their peers. Almost 90 percent of data masters can also easily connect external sources to their platforms to establish a mutually beneficial exchange. As a result, 39 percent of these companies can settle claims faster and more accurately.

Insurers should align their data to business strategy

According to the study, only 41 percent of insurance companies ensure their data stewards align organizational data and analytics strategy with overall business strategy. To be data-driven, insurance companies need to consider and invest in four key areas:

  1. Build an infrastructure to quickly apply insights from data: A modern technology platform is required to integrate disparate systems, gain a comprehensive view of risk, and deliver the required data in a timely manner.
  2. Establishing a suitable operating model to scale data-driven insurance applications: Data governance and expertise should be provided centrally in order to best support the departments in the decentralized implementation of use cases.
  3. Foster a data-centric culture across the organization: Establish agile ways of working and empower employees at all levels with tools and expertise to apply data. In an agile culture, business teams can develop and test new ideas together with data experts.
  4. Orchestrating an open data ecosystem: by participating in data ecosystems, working with InsurTechs and establishing a data-based approach, for example with a view to more sustainability.

methodology of the study

As part of this study (Insurance Data Masters Report 2022), 510 executives from 204 insurance companies were interviewed – one data specialist from each company and one executive for each line of business. In addition, 10 interviews were conducted with senior insurance managers to learn their views and expertise on these insurance companies.

About Capgemini

Capgemini is one of the world’s leading partners for companies to steer and transform their business through the use of technology. The group is driven every day by its purpose to advance human potential through technology – for an inclusive and sustainable future. Capgemini is a responsible and diverse organization with a team of over 300,000 employees in almost 50 countries. With over 50 years of history and deep industry expertise, customers entrust Capgemini with the full spectrum of their business needs – from strategy and design to operations. The company relies on the rapidly developing innovations in the areas of cloud, data, AI, connectivity, software, digital engineering and platforms. The group’s turnover in 2020 was 16 billion euros.

Get The Future You Want | www.capgemini.com/de

Press contact:

Bark Alice Lejko
Capgemini Germany | Frankfurt
Tel.: +49 151 4025-1298
Email: [email protected]

Original content by: Capgemini, transmitted by news aktuell


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