P/C Insurers Slow to Achieve Analytics Ambitions: Survey

Just under half of property/casualty insurers recently surveyed by WTW say they plan to incorporate artificial intelligence into their analytics (49%), but most have yet to bring “traditional” analytics into areas other than pricing, WTW reports.

“While there is much benefit to be had in adoption of new technological solutions such as generative AI, most companies are still not close to realizing the full benefit of more ‘traditional’ AI approaches such as machine learning, and there are immediate and real gains to be had by applying these techniques throughout the organization,” says the WTW’s 2024 P/C Insurance Advanced Analytics Survey report titled “Advanced analytics: Bridging the gap between ambition and real-world success.”

The report summarizes the responses of 47 P/C insurers in the United States and Canada to questions about aspects of different insurance functions—underwriting, claims and reserving, expense management, marketing—where they are using advanced analytics today and where they plan to use analytics in two years time.

Comparing the results to an earlier survey in 2021, the report says, “Our 2024 reveals significant growing pains.”

For example, 36% of carriers surveyed in 2021 said they were using advanced analytics for claims triage in 2021, with another 42% saying they would do so within two years. But three years later, the percentage saying they are now using advanced analytics for claims triage is not even close to 78%. Instead, 33% now say they are using advanced analytics for this purpose. Another 40% expect to do so by 2026.

“The aspiration is there, with many insurers saying they intend to bring analytics into areas as diverse as claims, marketing, distribution and other areas within the next two years. But looking at actual use of analytics over the last few years, the results demonstrate that progress has been significantly slower than hoped for and in some cases non-existent,” the report notes, referring to similar results for other aspects of claims handling (evaluation of future severity, litigation and fraud potential, for example), reserving (where only 17% use advanced analytics) and aspects of marketing (where usage is less that 30% for all activities WTW asked about).

Ambitions are significant in these areas. Forty-two percent of the insurers surveyed plan to use advanced analytics for case reserving within two years, for example, and one-third want to use it for customer segmentation aspects of the marketing functions.

In contrast, the report shows that insurers have achieved their ambitions in the area of risk premium modeling—essentially rating or pricing. But they had already achieved those ambitions two years ago. Eighty-three percent said they were using analytics for pricing in 2021 and 84% said the same this time around.

Other aspects of underwriting and risk selection came in lower, with the lowest percentages recorded for underwriting workflow management or submission triage. In 2021, one-third of carriers said they were using advanced analytics for underwriting workflow management, with the another 39% expecting to do so within two years. For the 2024 survey, the figure for current use came in at just 22%, not the 72% expected based on the 2021 survey. But the aspiration is the same, with 49% of carriers surveyed now saying they expect to use advanced analytics for underwriting workflow management by 2026 (which would bring the total of those currently using and planning to use it to 71%).

Asked what has been holding them back previously, insurers selected IT bottlenecks (52%) and data warehouse constraints as the top two barriers. And those loom larger now than in 2021, when just 39% identified IT issues as a problem, and only 27% said they had the infrastructure/data issue.

The entire story can be read at Insurance Journal’s sister publication, Carrier Management.

Topics Trends Carriers Property Casualty