In previous posts, I have talked about how insurers should embrace customer-centricity and refine agent relationships as they seek to harmonize their international operating models.
Now, I turn my attention to how digital technologies enable insurers to draw other partners more closely into their innovation and product development processes as well as help to better align and coordinate internal departments and functions.
I’ll illustrate my point by means of two examples, each of which draws heavily on the role that advanced analytics has to play in digital transformation. My first example is the use of analytics for portfolio optimization on risk and return.
We could use analytics to identify most profitable portfolio mix based on the risk capital required by client segments, products, region, and sales agents. This would involve collaboration between internal functions such as risk management, underwriting, actuaries, provisioning and sales and marketing.
With a good idea of our sales targets and risk/return profiles, we can embark on a campaign to incentivize direct sales channels and agents to focus on the gaps in our portfolio. For example, they could be offered bonuses for selling home cover if that is a profitable line under-represented in the portfolio.
My second example focuses on improving risk capital optimization and portfolio diversification by introducing exposure data collection. Here, an insurer improves its reinsurance strategy and optimizes its group portfolio by leveraging centralized exposure data collection, analysis and adaptive underwriting guidelines.
Analytics is used to define the most beneficial group portfolio mix as well as reinsurance and retrocession needs. In the background, there is a flow of real-time data drawn from underwriting, reinsurance, risk management, underwriting, brokers, and actuaries to ensure that risk capital is optimized using up-to-date information. The insurer is aware of total exposure to specific catastrophic events, and is able to provide this information to retrocessionaires.
In both cases, analytics and data sharing vastly enhance agility, speed and prediction ability, not just across the organization but across the insurer’s value chain. In my next and concluding post in this series, I’ll look at the last piece of the puzzle, the front-end of IT.