Thanks to the boom of insurtechs over the past five or so years, insurers have more insight and solution functionality at the tip of their fingers than ever before.
In fact, between 2020 and 2021, there was a massive jump in funding for P&C insurtechs – the changemakers the industry has needed for some time. 2021 spotlights a nearly doubled amount funded at $10.3 billion.
However, in 2022 we have seen quite a steep drop in funding compared to 2021. According to CB Insight’s State of Insurtech Q2’22 Report, funding hit only 30% of 2021’s annual total in H1’22 for P&C insurtechs.
CB Insights, State of Insurtech Q2’22 Report
This dip in funding could also play parallel with a new pain point that I’ve heard more and more in my conversations lately. With all of the auto insurance data and insights available to insurers (and more options becoming available daily): how are insurers harnessing all of their data in an effective and profitable manner?
Turning Data into Actionable Insights
According to CB Insights, “third-party underwriting data is only useful if P&C insurers correctly implement it into their underwriting models, building new model assumptions.”
The hypothesis of a correlation between funding and excess data availability stems from the thought that there aren’t enough data aggregators utilized to manage the breadth of data at the disposal of insurers.
Additionally, the insurtech market is becoming increasingly saturated. Everyone has a solution, and everyone has a breakthrough dataset. So with so many players in the space and so many cooks in the data kitchen, are insurers utilizing what they have to its fullest extent?
The Problem of Too Much Data
A new pain point that I’ve either been hearing in my daily conversations or uncovering through discoveries with prospective insurance clients is that they have too much data, and they don’t know what to do with it or don’t fully utilize the amount of data they have. Additionally, insurers are typically balancing many vendors, and unless your team has a smart data-storage system, it can be tough to keep up with what you do and don’t already have.
A separate problem that aids this issue of managing data also stems from vendors creating pre-built packages of data insight instead of taking a more modular approach and working with the customer to discover the best fit.
A mid-sized MGA in the United States recently shared with me that the reason why they didn’t go with another vendor was because the package that provided the insight they were looking for also included other pieces of data that they didn’t need or want but were still expected to pay for. The lack of configurability was a turn-off for the group.
According to research by the Boston Consulting Group, “75% of insurers lack a common data-storage system or an appropriate taxonomy to combine diverse types of data.” Combining a lack of smart data storage with a data-hungry consumer is a recipe for wasted money through forgotten and unused data.
Insurance Data Masters
Of course, it’s imperative to be at the forefront of data innovation and utilization if you want to be competitive in today’s underwriting market. So how are insurers managing their data effectively to boost profitability?
Capgemini has identified a profound group of insurers called “Insurance Data Masters”. Insurance Data Masters utilize a breadth of different technology to optimize operations with a data-driven approach. These organizations are “considerably larger than their peers, with most averaging over $20 billion USD in revenue,” states Ramana Bhandaru, Global Financial Services Insights & Data Leader at Capgemini.
According to Capgemini’s Report, this group of insurers possesses three key differences from those not a part of the Insurance Data Masters group:
- 92% have a centralized governance or facilitation body
- 62% have collaborations with insurtechs
- 97% have created open application programming interfaces (APIs) to allow external parties to access their data
So how can smaller insurance players align with the success of Capgemini’s Insurance Data Masters, and apply it to their everyday initiatives to improve profitability and leverage the data at their fingertips?
How to Maximize Your Auto Insurance Data
The first way that an insurer can ensure that they are utilizing the data that they have efficiently (and keep up with the variety of sources!) is to implement an effective data management system/database. There are vendors that offer these services specifically for insurance entities and even some Agency Management Systems (AMS) are robust enough to take over the role of a data manager. Applied Systems AMS is one that I constantly hear my customers utilizing in the P&C space.
Secondly, in regards to increasing profitability, Capgemini has identified that only 40% of insurers are utilizing their data to make waves in new markets and develop new products. An avenue a smaller insurer could take if financials or technical support is an issue is to develop products they already have (such as expanding coverage) instead of building something out that’s brand new. Otherwise, utilizing your data to set yourself apart from your competitors will only benefit you and your customers when acquiring new business.
If you’d like to learn other ways you can maximize your auto insurance data, watch our exclusive webinar, The Secret’s in the Numbers: How Top Insurers are Leveraging Data to Gain a Competitive Advantage.
