How insurers can achieve data mastery
Becoming a digital business is the top priority among insurance CIOs, according to Gartner research. P&C and life insurers have been on a journey towards digital insurance for many years now, but it has just escalated to the top business priority for insurance CIOs in 2019, outranking revenue and business growth.
To do this, insurers are embracing new business models and using emerging technologies to support innovation and transformation. For instance, a recent study conducted with insurance CIOs shows that investments in data and analytics, AI, and digital transformation are projected to grow in 2019, while investment in infrastructure and data center will shrink.
Data mastery is needed to enable the Intelligent Insurer
Insurers are becoming increasingly aware of the important role that data and analytics has in their digital transformation. Although most insurers today are immature in their use of data and analytics, innovators are leveraging their data assets – along with a variety of external data – for competitive advantage.
In the future, building effective information management strategies will be essential in staying competitive in the industry. Likewise, leveraging data across the value chain will be a critical success factor. It is essential that insurers become “data-driven” or data-intelligent, to enhance the customer experience, reduce losses, drive underwriting profitability, and support new initiatives, like no-touch claims processing and digitally-enabled underwriting.
As part of this transition, IT and business leaders will need to exploit data to help improve decision accuracy, automate or innovate business processes, and implement machine learning, artificial intelligence or other advanced analytics technologies.
This will be a difficult task for most insurance companies. Our research has found that few insurers have the foundational elements to be an intelligent insurer. They lack data mastery and/or the organizational strategy, people and skills to effectively exploit data. We expect this trend to continue through at least 2022, as only 40% of digital mature insurers will have achieved the data mastery necessary to allow them to dominate their markets by then.
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A new technical approach is required
As business leaders begin to build a deeper understanding of the role of analytics in their success, CIOs and IT leaders must establish the right skills, tools and technologies within their IT environment. As such, data and analytics, including machine learning and artificial intelligence, has become the top game-changing technology in insurance CIOs.
Innovative insurers are building the use cases for these technologies in areas such as underwriting, claims, marketing, and customer service. However, our research has found that the return on investment for these implementations are moderate to low today.
Most data and analytics IT budgets are smaller than what is needed, forcing the organization to prioritize the use cases. In the many instances when data projects are IT-led, there are not metrics in place to measure their impact on business objectives. As a result, the value of many data and analytics projects are unknown.
Data mastery paves the way for digital success
Given the focus on data and analytics, innovative insurance CIOs expecting to develop more futurist corporate cultures by 2030 will build, buy or acquire technology and data capabilities to create new and differentiated products, services and business models — creating more competition for incumbent insurers.
The investments of these innovative companies are likely to average twice what their more conservative peers make. They’ll consider data their single most important asset, and disrupt the industry by setting data mastery leaders apart from those that lag behind. These companies will find greater impact from data and analytics initiatives, and use this capability to drive new business models, such as the monetization of data.
Gartner encourages insurers to create a roadmap to build intelligence now in order to stay competitive and not fall victim to innovative insurers who have already began this transformation.
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