Back in the early ‘70s, the fictional application of a technology called bionics created a pop culture icon in the form of The Six Million Dollar Man. The main character in this TV program went from near death to “better than he was before. Better. Stronger. Faster.” The technology that made him remarkable extended his sight, increased his reach, and provided more lift than any other human being ever. But here’s the point: If each of three people had only one bionic advantage, the story would have been far less effective than one character possessing all three capabilities simultaneously. Like The Six Million Dollar Man, some carriers today have implemented many operational and technology improvements over the years and now have iconic brands built around vigorous performance in growth and profitability.
One could argue that like the three fictitious bionic powers, Big Data, predictive analytics, and Web-based services are creating the same bionic results in real life for organizations across the globe— not the least of which are insurers in the P&C industry.
When consumers, business owners, or corporate risk managers shop for insurance today, they often deal with an opaque marketplace where riskiness is rated less accurately at some carriers than others. That said, some carriers, afraid of taking on new risks, stick to their own market niches and avoid new ones — preventing their abilities to be competitive in the larger marketplace.
However, other carriers are blazing trails using newer technologies, data sources, modeling approaches, and electronic connectivity to better manage risks in an increasingly mobile world. I have created a framework to help identify how carriers are structured to compete on analytics here.
A key approach for carriers to achieve and maintain competitive advantage is to apply multiple improvements concurrently to their own risk management approaches. Then they will attain the business “lift” that modern rating plans promise. The resources for enabling growth are available: enhanced insurance programs powered by big data, predictive modeling, and decision support systems. Those resources will support rating, quoting, binding, and issuing policies, in addition to servicing calls, inquiries, and claims, and developing marketing and advertising campaigns.
If any insurer doesn’t know how to improve its performance, I’d suggest taking a look at an old episode of The Six Million Dollar Man. The price tag for an insurer to acquire bionic-like capabilities may not be as much, but the results of adding several capabilities simultaneously may be just as great.
Marty Ellingsworth is president of ISO Innovative Analytics (IIA), a member of the Verisk Insurance Solutions group at Verisk Analytics (Nasdaq:VRSK). Mr. Ellingsworth and IIA develop advanced predictive modeling tools for the property/casualty insurance industry.