How Predictive Analytics are Transforming the Insurance Industry

How Predictive Analytics are Transforming the Insurance Industry

In this interview, the co-founder and CEO of Atidot, Dror Katzav, discusses how big data and predictive analytics are transforming the insurance industry. His company provides insurers with the tools necessary to assess and analyze troves of data in a matter of minutes, enabling them to make strategic business decisions while offering their clients the most relevant services.

Keep reading to learn how Atidot is designing technology that easily integrates with insurers’ legacy systems and transforms raw and often unutilized data into valuable insights.

The life insurance industry has been challenged since 2008. Low-interest rates are reducing the profit margin for many insurers, driving them to try all different things to improve profitability, including going direct (MassMutual - HavenLife), changing their products (John Hancock - Vitality), consolidating, or rethinking their risk.

Key exposure in today’s world is through the consumer. Predicting the consumer’s behaviour becomes more and more challenging as time goes by since almost any data point could be relevant. Some people are market savvy, so they investigate insurance companies’ returns and guarantees before, during, and between their policies. Some people cannot afford an immediate expense exceeding $500 USD, so they are very sensitive to premium changes. Some people like to live at a higher standard than their friends and peers, some are frugal. Data on all of this is now available.

Insurance companies that use data properly can really move the needle. On the distribution front, policies are under-insured by a very large amount. In an analysis we did of the US Life Insurance industry we found that only 26% of the current coverage need is being met, so not only were policyholders not nearly as protected as they need to be, but providers were missing out on $70 billion in potential revenue. Everyone stands to gain by using data to properly address the issue, and we can use the data to fix it.

Finding the right way and time to contact policyholders is crucial, when they do not get the right offers at the right time more than 40% of policies end up lapsing prior to reaching profitability. On the capital side, insurers increase their reserves every year, while relying on models and techniques that haven’t changed in 20 years. In IT, data is siloed, messy, and raw, therefore, 80% of it is not monetized and digitization and going direct makes the challenges exponential.

No one has real-time visibility into their risk, customers, and products.

Having the ability to turn your data into insurance specific insights in real time changes the equation. Companies can reduce their reserves and capital requirements, they can build better products, they can customize their approach to customers, they can be on top of things in real time.

Any change in the market, product, or customers’ life is addressed, turning the industry from policy-centric to data-centric.

A critical issue that the life-insurance industry is facing is high lapsation rates and how insufficient much of the coverage provided by policies is, due to a lack of up to date policyholder information. Atidot recently found that in the US, only 26% of the total coverage need for life insurance is currently met, leaving 74% of unmet potential coverage. This represents both inadequate coverage for the consumer and missed revenue for providers. Indeed, this equates to life-insurers missing out on nearly $70 billion USD annually. By providing big data, AI, and predictive analytics tools to insurers, Atidot can tackle this problem and help life-insurers provide appropriate levels of coverage.

Much of this can be attributed to the fact that in the life insurance industry, much of the readily available data is not being utilized. For example, when a client notifies their insurance company of a change of address, that information normally is viewed simply as technical data. However, a seemingly simple update such as an address change could indicate substantial life changes for the client - did the policyholder just move from a small apartment in the city to a house in the suburbs? If so, this could represent that the client is now married, or they are starting a family, or that there has been a drastic change in salary, etc. This additional information is crucial. By viewing all data as important and having the tools available to thoroughly assess and analyze troves of data in a matter of minutes, insurers are able to make strategic data-driven business decisions while simultaneously ensuring their clients are receiving the most relevant possible service as their lives continue to change.

In doing so, Atidot helps life insurance companies optimize their book of business with actionable business insights. Atidot extracts and normalizes unstructured data trapped in insurers’ legacy systems and focuses its analytical firepower on providing better customer insight for the purposes of improving sales and retention. 

Atidot provides a technology product that acts as a supplement to insurance companies’ legacy solutions to enable:

Atidot does this by generating micro-segments of the population with a defined insurance footprint. Having micro-segments allows the company to make much stronger predictions about the interaction between the policyholder and their policies.

We provide this to insurers in an easy to use SaaS platform which transforms raw and often unutilized data into valuable insights, prompting insurance companies to contact their existing clients at necessary times as well as help them to better understand prospective customers in the process.

The tools are capable of processing thousands of separate data points, including external sources such as open data and IoT derived data, very quickly, enabling life insurance providers to create more accurate and personalized policies and pricing.

Moreover, the platform collects, cleans, and organizes insurance companies’ proprietary data into a uniform format before supplementing it with new open source data.

The data powered tools are easily integrated into insurers’ existing, tried, and tested models, offering them a data-fuelled boost instantly. If the carrier has other resources that might be useful we will take them and use them to their advantage. In cases where the companies are resource constrained we will do this. If you don’t have your systems ready, we will come and help.

We designed an insurance-specific data model to consume legacy data, clean, normalize and label using machine learning and artificial intelligence. We can tell for example if a currency field is premium or face value, if dates are purchase dates, payment dates or birth dates, if data points relate to owners or beneficiaries and much more.

Lastly, we can back-test results, showing value on historical data.

 We believe in the API ecosystem. In today's world of technology, no one can build a self-made end-to-end solution in their basement. People rely on products and technologies, therefore, having strong APIs helps in becoming agile and focusing on your strengths.

Insurtech has really just started, it is a pretty young field. One of the good things about insurance is that every turn you make is the right turn. There is always more to do and there is a need for it.

Data will be king in the future, and we want to be the crown jewels. Atidot is actively partnering with leading players in the ecosystem, including Microsoft and Sureify, with several more partnerships to be announced in the coming months. 

We are expanding our US, UK, and EU footprint while pushing the technology beyond the horizons using elite data scientists, software developers, and actuaries such as Assaf Mizan (former IL commissioner's chief actuary) and Martin Snow (former lead pricing actuary at Prudential and appointed actuary at TIAA).

We plan to expand our operations and refine the technology. We have recently opened an office in the U.S. and are making strategic hires, such as onboarding Martin Snow. We are also constantly engaging with leading life-insurers looking to provide them with cutting-edge technology to enhance their services.

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