Insurers urged to make ‘strategic changes’ on data use as they chase profitability

Insurers need to make “strategic changes” to better analyse data as they rely a lot on historical figures and models.

That was according to Robin Gilthorpe, Earnix’s UK chief executive, who told Insurance Times that such a move would help firms “thrive in a dynamic environment”.

This came after the insurtech said in its Insurance Operations in a Changing Industry report that 48% of businesses had been prioritising profitability, compared to just 13% that focused on growth.

The report, which was published earlier this month (11 October 2023), said such a shift was understandable, with the cost of claims and regulatory pressures meaning that carriers ”need to improve their short-term financial health to mitigate risk”.

Gilthorpe felt a change in the way data was used would be key to help achieve this.

“One of the key issues that we’ve seen has been that this is an industry that’s analytically intense and prides itself on being able to do that analysis, but a lot of it has relied on historical data and models,” he said.

He explained that for loss events that have little to no data, such as climate change or micro-mobility like e-scooters, these methods may fall short.

“Our contention is that requires a strategic change, not just a tuning of the existing parameters,” he added.

“That strategic change requires a change in the way that we behave, as well as the underlying technologies.

“While that’s challenging, if you can do that, it’s not just a question of merely surviving, it really is a chance to thrive in that dynamic environment.

“Frankly, a lot of insurers are either going to be unwilling or unable to make those changes and so that increases the gains for those that can be dynamic and seize the moment.”

Regulation

The survey for Earnix’s report, which was conducted in June 2023, included 400 global insurance executives from Europe, Australia, Canada and the US.

It also found that 38% of participants reported that changing industry regulations will require them to consider new tools or technology.

This includes artificial intelligence (AI), machine learning, personalisation, dynamic pricing and predictive analytics.

The report added: ”Insurers need to develop effective strategies and embrace new technology innovations, not just to survive, but to thrive in the short term – and beyond.

“While insurance carriers continue to face many real challenges, it is possible to overcome them and achieve their most critical business goals through the implementation of best-in-class technology.”