When it comes to competing on data analytics, one might assume that the large carriers would be the likely experts, with smaller carriers trailing behind. However, in a recently released Verisk Review article titled “Analytic Capabilities: Your Customer and You,” Marty Ellingsworth, president of ISO Innovative Analytics, notes that every executive in the market feels pressure to compete on analytics, but few have road maps showing their strategy, actions, investments, and governance. They all want — and need — to know how to make decisions on predictive modeling goals and how they compare with their competition.
Understanding customers, writes Ellingsworth, is what competing on analytics is all about: What do customers want? How do they want to purchase products and services? Why did they choose you? What makes them stay or leave? What makes them recommend you to family and friends? Which ones cost the most to serve? And do your promises, prices, and products provide for each market segment?
The questions evolve as a carrier learns more, and a carrier learns more as its capabilities to compete on analytics mature. The more effectively a carrier uses predictive analytics, the better it can group customers with similar needs, preferences, and other important attributes — such as riskiness, loyalty, and ability to add other products. Moreover, a carrier that uses analytics can more consistently select risks and accurately forecast losses, expenses, retention, and lifetime profitability. The company that embraces predictive modeling and moves toward the highest level of predictive accuracy will have a competitive edge in protecting its book of business and achieving profitable growth.