Data Analytics Influence Price, Underwriting for Insurance

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Few industries have been as deeply affected by the big data revolution as insurance: The rise of artificial intelligence and the application of machine learning make it possible for insurers to analyze increasingly large data sets and identify critical patterns. As a result, companies are making smarter, faster, more customized decisions regarding products and policy pricing.

In this new era, the banking partners of insurance companies not only need to understand what’s happening in the industry, but also how to help clients thrive as their industry changes. A good partner, for instance, understands the key drivers in their industry – and how a company will need to innovate across their enterprise in order to also keep up with innovation happening across the industry.

Real-time cash management, for example, is an increasingly important aspect of the industry as insurers offer instant quotes, flexible policies, and real-time underwriting based on improved data.

"We're in lockstep with our customers as they learn and employ increasingly advanced data analytics strategies," Fifth Third Financial Institutions Group Managing Director and Group Head Joshua Landau says. "We're there with them, understanding their evolving needs and helping them manage their cash reserves accordingly."

Cash-management improvements are a benefit on their own, but when taken in context of the ever-changing technologies of the insurance industry, they become an essential part of offering the best products and services to customers.

The Big Data Difference

Insurers are hardly strangers to large data sets—companies have been using data for centuries to spot trends, predict potential behavior, identify new business opportunities, and more. "The difference now,” Landau says, “is that AI is helping illuminate patterns that were previously invisible to the human eye or even the most sophisticated legacy models."

Here are a few key examples of how technology is impacting the industry:

  • Personalized plans and pricing. Insurers know more about their customers than ever before, which means they can provide more personalized policies and rates. This is leading to improved customer retention and new product lines. For example, contractors are now able to access on-the-spot online liability insurance for short-term projects.
  • Improved fraud mitigation. Fraudulent claims account for between 5% and 10% of all claims. With AI, companies can automate fraud processes and identify patterns in data associated with fraudulent claims. One insurtech startup, for example, employs AI to help match photos of the damage caused by a car accident with the cost claimed by the customer.
  • Streamlined application processes. Technology establishes operating efficiencies by automating and streamlining much of the insurance application process. Today, for example, an individual applying for homeowner's insurance may find some of the sections autofilled for them with information gleaned from other data sources.
  • Improved underwriting. Access to more and improved data allows insurers and reinsurers to assess their own risk better and price policies accordingly. Auto insurers, for instance, have long correlated accident risk with car color and driver age. Now with expanded data sets and analysis, auto insurers can include information such as weather, commute patterns, and even typical times of day for accidents.

How insurers are utilizing this data has become an industry differentiator. "Companies with strategies for acquiring more data capabilities and talent are setting themselves up for future success," Landau says. However, the opportunity afforded by big data also comes with added responsibility—consumers are increasingly concerned about how insurers leverage their data.

"As a response, many insurers are recommitting to using data in responsible and secure ways," Landau says. "They're also offering consumers increased transparency about the data they're collecting and why."

Partners in Innovation

The ability to customize policies, launch new products, underwrite on the spot, and respond quickly to claims provides consumers with better choices and makes insurers more competitive for their business. Yet these powerful innovations simultaneously create new demands on the finance side.

"Instead of managing their cash reserves on a monthly or quarterly basis, insurance CFOs are more interested in managing their cash in real time," Firth Third Head of Corporate Banking Kevin P. Lavender says.

This allows the C-suite to have a more accurate view of the company's finances and credit options and ultimately make smarter, faster decisions about investments, the performance of new products, and even acquisitions. "We want to help our clients innovate, not hinder their progress," Lavender says. "To that end, we're updated on the trends, aware of our clients' needs, and ready to provide information, guidance, and finance options exactly when they're needed."

Further, the bank's focus on specific industries such as insurance ensures Fifth Third is evolving right along with its clients. "As an industry partner, Fifth Third can provide best-in-class service, leveraging our industry knowledge and insights, "Lavender notes" Specialization allows for a deeper relationship and our holistic approach leads to better outcomes for our insurance customers."

The views expressed by the author are not necessarily those of Fifth Third Bank and are solely the opinions of the author. This article is for informational purposes only. It does not constitute the rendering of legal, accounting, or other professional services by Fifth Third Bank or any of their subsidiaries or affiliates, and are provided without any warranty whatsoever.