With the integration of advanced analytics use cases in insurance to achieve their business objectives, there has been a paradigm shift in the activity of insurance industries. Advanced analytics helps to mine actionable insights from big data that can be used for a plethora of business use cases. Insurers are constantly using advanced analytics to not only protect their companies from risks, but also use consumer information to find potential growth opportunities.
Detection of Fraudulent Claims
Because of fraudulent claims, insurance companies incur tremendous losses every year. Advances in data science in insurance technology have made it possible to recognise fraudulent activities, suspicious claims and behavioural trends using predictive analytics that integrates statistical models for successful detection of fraud. These models use historical information on fraudulent activity to arrive at particular circumstances that predict that statements can be false.
Detecting and Mitigating Risk
Since the underlying nature of business in the insurance industry includes risk, advanced analytics are used to perform a real-time risk analysis that helps companies in a dynamic risk environment to be fast on their feet.
For example, the ability to reliably determine the risk presented by a single driver in the case of car insurance enables providers to devise a competitive and profit-making premium. Cars that are connected to the internet will transfer a large amount of data continuously.
Personalizing Marketing Strategies and Targeting Specific Customer Groups
Customers are able to use services that fit their needs and lifestyle better and to search for customised deals, policies, programmes of loyalty, and recommendations.
Insurance firms face the task of engaging their customers and interacting with them efficiently in the age of robust digital communication.
Advanced analytics are fuelled by a comprehensive database that includes different client information such as demographic data, desires, personality, details of lifestyle, interests, belief systems, among many others, to derive insights from an expansive database.
This allows insurance providers to ensure experiences that are highly customised and most relevant.
Influencing Customer Behaviour
Insurance firms have also used advanced analytics to analyse telematics data and influence client actions. Health insurance providers, for example, will collect and analyse data generated from IoT devices and wearable technology such as fitness trackers to track variables that decide a person's health and quantify risk.
Insurance firms may provide a thorough evaluation of the health of their clients by tracking actions and behaviours and advising customers to take better care of their health, thus mitigating the risks involved. Furthermore, insurance providers may provide services and discounts and encourage clients to use health tracking systems.
Lifetime Value Prediction
Customer Lifetime Value (CLV) is forecast using data on customer actions to assess the profitability of the customer for the business. Behaviour-based predictive models are used to process all consumer information and arrive at a customer purchasing and retention prediction.
These models offer insights into the probability of the actions of customers in the preservation or surrender of a policy. For designing business strategies, CLV can also be leveraged as it represents one of the essential characteristics of the consumer.
It is of prime importance to the insurance industry to forecast the turn of events in the future. Being able to make precise forecasts of claims helps to minimise risks, gain competitive advantage and reduce economic losses.
Some of the most complicated processes involved in developing financial models that have a large number of variables influencing the result are driven by advanced analytics. To identify relationships between vast quantities of variables, algorithms are developed and detect many significant parameters that are vital to building a customer portfolio.