Holborn recently attended Advisen’s Predictive Modeling Conference, sponsored by CareBridge International and HortonWorks. Advisen is a leading provider of data, media, and technology solutions for the commercial property and casualty insurance market.
Advisen began the conference by stating that only 25% of decisions contemplate predictive model results – they contend that those not using Predictive Analytics in the future will experience adverse selection. The insurance industry is moving toward “Cognitive Underwriting” as a means of both profitability enhancement and competitive advantage.
Frequency & Severity to Prevention & Elimination
By integrating Predictive Analytics and data mining from the Internet of Things (“IoT”), the insurance industry is beginning to move from loss mitigation to possible loss elimination. The IoT allows for data capture from an individual’s daily life – cell phones, smart watches, auto GPS, and blockchain and cloud-computing technology. While becoming more widespread, personal lines currently rely on this data more than commercial lines.
The most efficient use of data is taking advantage of the interaction and data from multiple technologies. As an example, one insurance company is using telemetrics and weather data to predict where a driver is going based on past driving records. The carrier is then able to alert drivers if they are driving into the path of a destructive storm and offer alternate routes or nearby garages. Taking it a step further, the company offers incentives, such as a coffee discount for following the diversion – and, presumably, mitigating potential loss.
The IoT impacts the insurance industry in a variety of ways through product design, pricing, underwriting, policyholder services, claims, and staffing, as companies rely on technology for tasks previously performed by teams.
With technology advancement, regulations will need to change to reflect the current environment. Carriers in the EU are regulating how personal data can be used, which may help drive change to regulation in the U.S.
As technology continues to evolve and the industry with it, reach out to Holborn for the latest news and analysis.