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NEW YORK—Insurers will need to better leverage analytic technologies to make sense of the growing amount of customer and market data available in order to gain competitive advantage, according to a report released this month by PricewaterhouseCoopers L.L.P.
The report, “The Insurance Industry in 2012,” says that while the emergence of “big data” will be a factor in many industries, the proliferation of technologies to manage and analyze massive data sets will be particularly important to the insurance industry. The report says big data offers insurers great promise to improve their overall performance by facilitating greater pricing accuracy, deeper relationships with customers, and more effective and efficient loss prevention.
While commercial insurers have always focused on loss control and risk management, the use of big data eventually may transform the commercial insurance business model, PwC predicts. “Carriers may no longer need to compete on price—they instead may be able to assess the risk of individual customers based on their actual behaviors,” the report states.
“This could enable the industry to return to policyholder-specific pricing because customers will no longer be able to game the market for better entry-point prices. Additionally, commercial insurance increasingly will be able to focus on providing customized, flexible products and value-added services that involve working with the clients to proactively avoid or reduce losses and manage risks,” the report states.
The data sets consumed by these tools will come from a variety of sources, including mobile devices, social networks and Internet-connected sensors placed on everything from buildings to bridges, said the report. Insurers must find ways to use these new streams of information to supplement traditional underwriting and policy data and improve business processes.
“Insurers who intelligently harness this agglomeration of information will be able to better understand their customers and prospects, develop solutions—not push products—that address very specific customer needs, and build a foundation for a very positive customer experience,” said the report. “From a corporate performance standpoint, this will facilitate better pricing, optimization of marketing and contact management spending, sharper underwriting, improved retention, and better loss control.”