Many North American life insurers are getting ready to make a lot more use of predictive analytics in forecasting how long people will live.
Few of those insurers are making much use of predictive analytics in individual annuity pricing or claim management operations today.
Analysts at Willis Towers Watson have published data supporting those conclusions in a summary of a new survey of 51 large life insurers based in the Americas.
The team asked the insurers how about they’re using predictive analytics technology, and how they might use predictive analytics technology two years from now.
“Predictive analytics” is the art of using data to get insights into how things are going today, and what might happen in the future.
Willis Towers Watson has an interest in this topic because it employs consultants who can help clients buy, set up and use predictive analytics systems and services.
The insurers that participated in the new survey told Willis Towers Watson that they want to do more with the information they already have, and with information customers provide intentionally.
About 55% said they already use predictive analytics to analyze internal customer data, and 55% said they use predictive analysts to analyze the information resulting from customer interactions and surveys.
About 82% want to apply predictive analytics to internal customer data in the future, and 73% want to apply predictive analytics to customer interaction and survey data.
Only 13% are applying predictive analytics to social media; 35% hope to begin applying the technique to social media posts within two years.
Annuity Issuers v. Everyone Else
The survey team found that issuers use predictive analytics for individual annuities in a much different way than they use the tool for other product lines.
About 55% now use the tool for forecasting mortality risk and morbidity risk for the group annuities inside many pension plans, and 40% use the tool for forecasting mortality and morbidity risk for individual annuities.
Just 19% use predictive analytics for forecasting group life mortality.
But individual annuity issuers, especially, are much less likely to use predictive analytics in pricing or claim management: Only 7% said they now use the tool for individual annuity or claim management.
Use of predictive analytics is much more common in pricing and claim management in the group annuity market.
About 28% of the survey participants use predictive analytics for group annuity pricing, and 10% use predictive analytics for group annuity claim management.
The new survey results suggest that selling predictive analytics tools to individual annuity issuers could be good business.
About 40% said they hope to be using predictive analytics in individual annuity claim management within two years, and 47% said they hope to be using that tool in individual annuity pricing.
An infographic based on the Willis Towers Watson survey is available here.
— Read 3 Life Sales Innovation Mysteries That Drive Actuaries Wild, on ThinkAdvisor.