Denver, CO – Valen Analytics, a provider of proprietary data, analytics and predictive modeling for P/C insurers, recently announced the findings from their second annual underwriting analytics survey. The results indicate that more insurers continue to adopt predictive analytics in underwriting, but synchronizing strategies within an organization and sharing results with outside entities, like ratings services, remains an issue.
Out of 115 survey respondents, 65% reported use of predictive analytics in underwriting, up 9% from last year. Carriers cite better risk assessment (83%), accurate pricing (82%), and protection from adverse selection (73%) as the three most important areas when investing in modern underwriting strategies. Apprehension over underwriter adoption when implementing predictive analytics dropped significantly as well, with only a quarter (25%) of respondents expressing significant or high concern, down an incredible 52% from the previous year. And yet, over half of carriers (52%) continue to express an internal struggle between actuaries and underwriters over price. The majority of respondents attribute this conflict to “underwriters dismissing data for judgment” (50%) followed closely by “actuary rates are too high for the market” (42%).
Externally, many carriers find difficulty in making the case for predictive analytics. Less than a quarter (21%) feel effective in conveying their predictive analytics results and ROI to ratings agencies like A.M. Best and Moody’s and Fitch. Carriers also remain uncertain of the impact analytics has on these ratings agencies, with only 35% believing it has a moderate or significant impact.
“It’s promising to see the progress carriers are making in recognizing the value analytics brings to underwriting performance. The industry appears to be in a state of transition, with many still struggling to align their organization around a holistic predictive analytics strategy,” said Dax Craig, CEO of Valen Analytics. “In order to grow in analytics, carriers must develop a firm predictive model implementation plan, with clearly defined goals and measurements of success that tie directly to the overall organizational strategy.”
Securing and retaining data and analytics talent is another challenge for respondents of the survey, with 78% citing it as “very difficult” and “moderately difficult”. The leading reasons stem from candidates “disinterested in an insurance career” and difficulty in finding suitable candidates in the area.
Click here for the infographic: Valen Analytics 2016 Underwriting Analytics Survey Results (PDF).