AdvantageGo research reveals a lack of access to the latest and most up-to-date data sources is holding the insurance industry back and impacting underwriting profitability.
Can the insurance industry rise to the challenge and get more scientific on risk?
This question has led us to want to understand how insurers are using data to make risk decisions at a time of turmoil and change. Ultimately, we all want the same thing – to enable better, smarter, risk-focused decision-making, and in doing so, lay the groundwork for the future success and growth of insurance.
The Science of Risk Report reveals key insights from research conducted on behalf of AdvantageGo by independent research organisation Vanson Bourne, following interviews with 200 underwriting decision-makers from B2B insurance organisations in the UK and US. The report also offers further insights and analysis on the improvements insurance leaders can make to be as scientific as possible when it comes to making their underwriting decisions.
Our research reveals only 16% of organisations have access to all of the latest up-to-date external data sources needed to make scientific decisions on risk and the vast majority, 87% of respondents, admitted their organisations could be more scientific in their approach to underwriting decision making.
As a result of their struggle to be truly scientific, underwriting decisions aren’t as profitable as they could be, and respondents are concerned that competitors are better placed in the market. Worryingly, 81% have had to make pre-bind decisions that are not based on all of the data necessary to be profitable – holding the industry back and ultimately impacting the bottom-line.
When it comes to the technologies currently used to assist with underwriting decisions, 93% state there is room for improvement with how technology provides scientific insights to guide the underwriting decision process, and almost all (97%) believe that technology could help improve profitability and drive down combined ratios. Unsurprisingly, therefore, almost nine in ten are concerned that their competitors may be better using technology to make more accurate scientific decisions on risk.
The issues have, of course, been compounded by the COVID-19 pandemic, which has made underwriting more difficult in two thirds of organisations (67%). The primary reasons for this are the inability to access all of the available information (50%), and the pressure to make fast (43%) and profitable decisions (44%). As a result, 72% think they will need to evolve their use of technology in order to compete effectively post COVID-19, with 96% stating a likelihood that they will look to invest in new technology platforms to help with this challenge.
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