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22 June 2015

Prescriptive analytics "can help manage risk for insurance firms"

Content team

The growing use of prescriptive analytics will help insurance businesses to manage risk in the near future.

This is according to new research from PwC, which has forecast this will be a major trend in the sector in the coming years.

It claimed a combination of big data analytics, sensor technology and communicating networks could give insurers the capacity to anticipate risks and customer demands far more accurately than has ever been possible before.

Jamie Yoder, PwC global insurance advisory leader, stated: "The emerging game changer is the change in analytics, from descriptive (what happened) and diagnostic (why it happened) analysis to predictive (what is likely to happen) and prescriptive (determining and ensuring the right outcome).”

The organisation said potential benefits of prescriptive analytics could include improved pricing and sharper customer targeting, as well as a "decisive shift in insurers’ value model from reactive claims payer to preventative risk advisors".

PwC found insurance industry chief executives expect a greater level of disruption over the next few years than leaders in any other sector.

Some 60 per cent of the insurance chief executives surveyed said they can see more opportunities for their business than three years ago. However, 61 per cent believe they will face more risks.

Last month, a survey carried out by Accenture found ineffective use of data is a major barrier to risk management in the financial services sector. Just under three-quarters of businesses in the industry claimed the increased velocity, variety and volume of data impacts their ability to deal with risks effectively.

Content team, Bureau van Dijk

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