A recent report by global consulting firm, McKinsey, uncovered the way insurance companies in Europe, the Middle East, and Africa (EMEA) invest in and use advanced analytics (AA). Although many insurance companies in the area are putting resources into AA, the report says, they are finding it challenging to fully optimise its benefits. The findings list various key factors that hinder the successful implementation and value realisation from advanced analytics initiatives.
The first factor listed is the absence of support and sponsorship from top-level executives, which poses a significant challenge for insurance companies to effectively prioritise and allocate resources towards analytics initiatives.
The second factor, explains McKinsey, is a lack of alignment. If the AA initiative lacks alignment with the business, insurers may not see significant results. A misalignment between analytics teams and broader business objectives inhibits the ability to address crucial challenges and opportunities.
McKinsey lists slow and disparate implementation as the third factor. Implementing the use of AA in different departments of an organisation can be a lengthy process, usually lasting between nine and 12 months for each case. Additionally, the implementation process often occurs in separate and disconnected areas. The slow and siloed implementation impedes the rapid realisation of value and hinders collaboration between teams.
The fourth factor on the list is a lack of clear vision and link to value, which renders the company unable to effectively leverage analytics to drive better outcomes.
McKinsey explains that weak foundations in data, talent, and technology are also behind poor value. Inadequate data quality, talent shortages, and outdated technology infrastructure present significant obstacles for insurance businesses, limiting the successful implementation and scaling of AA initiatives.
Inadequate tracking and assessment of impact are also a factor. A notable portion of insurance industry players neglects to track or validate the impact of their analytics initiatives. This lack of monitoring and measurement can cause misunderstanding of values and prevent informed decision-making.
Poor data infrastructure and management also have an impact on the amount of value a company derives from AA. Data-related challenges, including poor governance, data quality issues, and limited availability, continue to obstruct many insurers. Enhancing data infrastructure and management practices is paramount to scaling the value realised from analytics.
Finally, the report claims that many insurance businesses allocate insufficient investments to analytics, which restricts the scope and impact of analytics initiatives. Consequently, leaders perceive less value in these capabilities, leading to reduced funding in subsequent endeavours. Increased investment in data, talent, and technology is crucial to accelerating value capture from AA.
In light of these findings, the report highlights four key strategies to expedite the impact of advanced analytics.
The first is to create an analytics initiative that maximises value, based on business objectives and use case prioritisation based on measurable value–which can then be used to hire the right talent, data, and technology. The study proposes a second strategy: utilising AA across all departments and domains, enabling the use of intelligence gathered in one area to improve processes in others.
The report recommends ensuring executive-level accountability to foster cross-functional teams made up of domain experts and analysts.
The final recommendation from the report is to invest in appropriate resources to unlock the full AA potential.
Insurance companies are also encouraged to consider using innovative insurance software platforms, such as Zinnia. These platforms streamline digital transformation and provide integrated analytics as part of their cloud-based offerings.
However, the effective utilisation of such features ultimately relies on individual businesses and their teams.
The McKinsey report underscores the importance of addressing the challenges faced by insurance companies in capturing value from advanced analytics. By adopting the suggested tactics and investing wisely, insurance companies in EMEA can create a path towards enduring development, more informed decision-making, and better customer interactions in the ever-changing insurance market.
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