Only 18% of insurance organisations considered data masters

While close to half of all insurance firms believe they are implementing data-driven product development and using it for risk insights, a new study has found less than one-fifth are actually ‘data-masters.’ In fact, the vast majority of insurance firms are still ‘data laggards,’ possibly because many firms neglect employee behaviours during digital transformation campaigns.

Insurers that are able to make the best use of data are already winning market share, improving key ratios and generating superior risk intelligence. However, a report from the Capgemini Research Institute has suggested many firms may be further behind their data journey than they think.

In a report titled ‘Data-Powered Insurer: Unlocking the Data Premium at Speed and Scale’, Capgemini interviewed 510 insurance executives at 204 insurance organisations with at least one data specialist. Overall, the researchers found that a sizeable minority of firms have implemented or are implementing new data measures in order to open up new markets, or improve coverage for old ones.

For example, 44% said they were using advanced analytics to enter niche markets or segments deemed too risky in the past, while 40% said they were developing new features and coverages in traditional products. Another data-driven product development was seeing 39% of insurers shift from protection to prevention.

Elsewhere, a similar number of firms were using data to provide risk insights, which they can remodel their businesses around. Almost half of all life and health insurance firms were moving towards deeper segmentation of consumers based on data-driven risk pricing, for example, while a further 43% of the same segment were using data insight to model for new or emerging risks based on data from diverse internal and external sources – and with climate change, economic turmoil and a global pandemic having shown how quickly new risks can evolve, that could prove to be a very important capacity for insurers.

At the same time, with InsurTech challengers disrupting the market, traditional industry incumbents will need to digitalise their services to avoid losing further market share to data-savvy competitors. To that end, Seth Rachlin, Global Insurance Industry Leader at Capgemini, noted that insurance firms can only compete with InsurTech by “embracing a data-driven approach to win market share, improve key ratios, and generate superior risk intelligence.”

With that being said, however, only 18% of insurance companies are what Capgemini would define as ‘digital masters.’ These organisations typically showcase three differences: 62% collaborate with InsurTechs; 97% have created open application programming interfaces to allow external parties to access data; and 92% have a centralised governance or facilitation body.

This third factor may have a particular impact – as without readying staff for adapting to new ways of working, any transformation can fall short. In this case, fostering a strong data culture across the organisation by adopting and encouraging employees to use data is crucial – but without putting in place bodies to facilitate behavioural change in the workforce, firms render it much more difficult to ascend to the status of data master. To that end, 70% are currently categorised instead as ‘data laggards’ by Capgemini.

Highlighting the potential gains of culture-led change, Ramana Bhandaru, Global Financial Services Insights & Data Leader at Capgemini, stated, “Only 18% of insurance organisations have both the technical capabilities, as well as culture and behaviours to support data-driven programs that derive full value from the growing volume of data… These organisations are referred to as ‘data masters’ and they are considerably larger than their peers, with most averaging over $20 billion in revenue.”