Predictive analytics is a game changer in the insurance industry
Predictive analytics has many practical applications in the insurance industry, including claims management, customer management, and risk pricing. June 29, 2012 | Levina LimThe insurance industry operates in a challenging environment pressed by tight margins, the push for lower pricing, and sluggish growth rates, including the general decrease of investment spending in the midst of the present economic climate. Customer attrition and insurance claims losses are major sources of the deterioration of the bottom line, which is worsened by the occurrence of unexpected catastrophes - floods in Thailand, earthquakes in Japan, hurricanes in the US. Predictive analytics plays an important role in the midst of this stiff competition and volatility. The insurance industry may be depicted to be built upon one core concept - the diversification of risk. Through the pooling of monies from a variety of parties with varying risk characteristics, risks are spread over large numbers of people over a longer time horizon. Since the profitability of the industry operates on tight margins, resting on meticulous fine-tuning of probabilities and careful apportionment of risks, the accuracy of the advanced models and analytical algorithms that underlie these risks are crucial. In 2003, International Data Corporation conducted a landmark research on the effectiveness of predictive analytics, which showed that projects that incorporated predictive technologies had a median ROI of 145% compared to the 89% their peers who did not, building the case for incorporating predictive analytical techniques into businesses. Today, organisations that lead in analytics have been found to outperform their competitors by more than three times, indicating the growing importance of analytics in providing a competitive edge. Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Data & Analytics, FSI Customer Relationship Management , Risk & PerformanceData & Analytics,FSI Customer Relationship Management ,Risk & Performance, Data & Analytics,FSI Customer Relationship Management ,Risk & Performance, Keywords:Predictive Analytics, Insurance, Claims Management, Risk Pricing, Straight Through Processing, SAS, AIG, Deloitte Predictive Analytics, Insurance, Claims Management, Risk Pricing, Straight Through Processing, SAS, AIG, Deloitte
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