The insurance analytics market is expected to reach a CAGR of 12.6% during the forecast period (2022 - 2027). With information pouring into the organization, insurance companies focus and turn vast data stores into actionable insights. Hence, this creates a demand for companies to adopt an insurance analytics system to manage rapidly changing market environments and profitability through better decision-making.
- The global insurance industry has witnessed a significant shift toward adopting digital technologies. According to the findings of a recent study, 86% of insurance companies are working on Insurance data analytics mechanisms for optimum predictions of big data reports (source: DAMCO Solutions).
- A recent study among 68 EMEA insurance companies has shown that around 85 to 90% of interviewed EMEA insurance firms struggle to see a positive business case on data analytics solutions. Insurance companies face various challenges that prevent them from reaching the potential of Data Analytics solutions. Insurers now feel that they have to jump in to not get behind of competition or behind of InsurTech startups, but in order to profit from these technologies, they will need a solid Data Analytics capability first. Also, over the past several years, in the US, life insurers have expanded their simplified and automated underwriting practices to make buying life insurance online easier and more cost-effective. Such factors are increasing the trend adoption of market growth.
- Furthermore, technological advancements such as AI, Machine learning are adding value to these solutions. According to a study by Accenture, implementing AI in the financial sector could lead to a 31% increase in profitability rates by 2035. Moreover, AI will enable customized financial services delivered to clients, leading to enhanced customer experience. Hence, AI-based insurance analytics solutions can save financial institutions billions in cost, create billions in additional revenues, and reduce fraudulent activities.
- Moreover, the increasing challenges faced by companies, such as dealing with catastrophes, managing amplified risk, meeting the demands of greater regulatory scrutiny, a more informed and demanding customer base, and navigating through a still uncertain economic environment, are further boosting the adoption of insurance analytics. According to IBM, Insurance organizations that have implemented advanced analytical solutions outperformed the competition by 76%.
- With the outbreak of the COVID-19 crisis, structural shifts due to volatility, uncertainty, and depressed economic activity have significant implications for the insurance industry. These shifts are forcing insurance providers to reimagine their business operations and customer experience. Moreover, the demand for digital interactions and better management of personal and health risks are accelerating investments in digital and analytics solutions. Hence the market is anticipated to grow over the forecast period.
Key Market Trends
Increasing Risks And Fraudulent Activities Are Boosting the Adoption Of Insurance Analytics.
- The insurance industry revolves around identifying and managing both human-made and natural disaster risks regularly. This uncertain risk creates considerable demand for integrated risk management, a combination of insight, control, and optimization of daily business practices. The insurance analytics solutions offer the essential insight required to improve risk management at all levels.
- Businesses and their insurers regularly have to keep pace with fast-changing and complex risks, such as extreme weather events, inflationary pressures, or cyber threats. For insurers, the challenge is to deliver data analytics at scale, to the right people, and at the right time. Insurers need to integrate data analytics into day-to-day decision-making and processes.
- Further, due to the rising digital population and their demands, players in the market are continuously driving innovation to mitigate risk and fraudulent activities. For instance, In May 2021, Shift Technology, a provider of AI-based SaaS tools to insurance companies, announced that it had raised USD 220 million to expand in the property and casualty insurance market.
- The trend adoption is more towards analytics being used to predict new customer risk and prevent fraud claims. Insurance organizations are increasingly using cloud-based, GPU-accelerated artificial intelligence (AI) and machine learning (ML) predictive analysis models to improve the customer experience and identify fraudulent insurance claims quickly and accurately.
- For instance, In September 2022, Atidot, a machine learning and predictive analytics solution provider, announced its partnership with NTT DATA, an IT services and digital business provider, to enhance customer experience by developing mature conservation programs, mitigating unintended risks, and providing the customers the intelligence to drive growth objectives by optimizing ROI and increasing growth efficiencies. It will enable the use of analytics to reduce underwriting cycle time to improve new client acquisition.
- India's Life Insurance Corporation (LIC) issued around 21 million new individual policies in 2021. Overall, about 28 million new separate policies were issued nationwide that year. Such a surge in the Insurance sector is increasing the demand for the insurance analytics market to lower the related risks further.
Asia-Pacific to Witness Highest Growth
- Asia-Pacific is expected to witness the fastest growth in the insurance analytics market due to consumer and businesses' increased take-up of analytics tools. The high adoption of digital infrastructure primarily drives the region's analytics markets due to the growing algorithm development, machine learning, and the rising need for customer and behavioral analytics.
- National governments play a pivotal role in the future growth of the insurance analytics market across the Asia-Pacific region by implementing initiatives to build more business confidence in the cloud. Countries like Hong Kong and Singapore have defined data privacy regulations and solid governmental support for the cloud leading the way in cloud readiness.
- Moreover, countries in the region have a strong base and growing insurance industry, further driving the market's growth. In September 2022, HDFC ERGO General Insurance announced its partnership with google cloud to build an online platform for selling insurance, offering tailored digital experiences to customers, responding to regulatory changes faster, and identifying insurance risks using data analytics and machine learning (ML). Google will also provide them with AI/ML technologies to build predictive insights and mitigate insurance fraud.
- According to the Japan Institute of Life Insurance, In 2021, around 95 percent of households in Japan head aged between 55 to 59 years had at least one member who owned life insurance whereas, with the head age of 29 or less, the life insurance ownership rate was recorded at around 70.2 percent. Such a large percentage of the insured population in the country is creating the demand for regional companies to switch to analytics-based solutions to offer better customer engagement and risk management solutions.
- Due to the COVID-19 pandemic, the insurance distribution model has been disrupted. The Asian insurers are adjusting governance and management and building new technical capabilities to satisfy the growing customer needs. For instance, China has experienced a dramatic increase in health insurance-related activities due to COVID-19.
The insurance analytics market is moderately fragmented. Players tend to invest in innovating their product offerings to cater to the insurance industry's changing demands. Moreover, players adopt strategic activities like partnerships, mergers, and acquisitions to expand their presence. Some of the recent developments in the market are:
- June 2021 - Minsait and Microsoft strengthen their collaboration in strategically promoting cloud transformation services and projects. Minsait's purpose is to facilitate the hyper-segmentation of customers and real-time information processing to design more personalized insurance to suit each profile.
- In June 2021 - Eckerson Group, in partnership with Insurance Data Management Association (IDMA), launched an online benchmark assessment geared to insurance companies' enterprise data and analytics teams. The benchmark is overseen by a board of data & analytics experts from the insurance industry.
- May 2021 - LexisNexis Risk Solutions announced the launch of a new insurance model for the Attract for Commercial Insurance platform, which leverages its relationship with the Small Business Financial Exchange (SBFE) and provides insurance carriers with extended visibility and financial data insight on small and micro-businesses.
- April 2021 - AXA Collaborated with Microsoft to create digital healthcare insurance on a cloud computing platform. The new collaboration is expected to establish an ecosystem for the local health networks that enables them to gain access to teleconsultation, self-assessment tools, and third-party services. This is expected to boost Microsoft's adoption of the insurance analytics platform.
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