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February 12, 2003 at 07:00 PM
NU Online News Service, Feb. 12, 9:40 a.m. – Insurance industry executives should refocus their efforts on their core business to return to higher profitability, says a new report by the national insurance practice of Deloitte & Touche L.L.P. in New York.
Deloitte & Touche suggests that the keys to success for insurance companies over the next several months are in their use of extended enterprises, improved underwriting techniques and strategic cost reduction.
When markets were booming in the late 1990s, “insurance firms were more intent on generating returns from managing assets than earning premiums from assuming risk,” says Owen Ryan, national managing partner of Deloitte & Touche’s insurance practice. “The economic changes of the last two years have called this strategy into question.”
The Deloitte firm also suggests that insurers divest lines of business that don’t support their core strategy, reduce their underwriting losses through the use of predictive modeling techniques and implement long-term and sustainable cost reduction beyond quick, one-time savings.
“Data mining and predictive modeling can dramatically improve underwriting performance compared to traditional methods,” Ryan says. “By analyzing customer data, together with both internal and external databases, firms can move underwriting from the existing class-based risk selection to an assessment of the risks presented by each individual policyholder. These underwriting techniques identify risk exposures more specifically, which is the basis for more accurate pricing.”
