Towers Watson's fifth annual Predictive Modeling Benchmarking Survey examined where and how North American property & casualty (P&C) insurers are embracing predictive modeling, a means to enhance performance improvement efforts in underwriting, pricing, claim management and other core functions.

Key Findings

  • Large carriers are more active in applying predictive modeling analytics to claim applications, and few small carriers have plans for claim-related applications.
  • Small carriers seek to differentiate themselves in areas such as service and claims, rather than by modeling.
  • Large carriers see far more favorable top- and bottom-line predictive modeling benefits, while some smaller carriers have concerns about adverse top-line ramifications related to defending market share and retention of existing business.
  • Personal lines carriers, particularly smaller personal carriers, find value in all forms of competitive analysis.
  • Most carriers first seek to increase the predictive power of their models by exploring new internal and external data as available. Personal lines carriers are more likely to emphasize variable interactions, while commercial carriers look to leverage external risk-specific variables.
  • Nearly half of personal lines automobile carriers have formal usage-based insurance (UBI) plans (up from a third last year), and carriers have progressed in executing those plans.
  • Carriers using captive agents believe there is greater agent understanding and approval of models than among carriers using independents, but there is still a broad lack of communication about predictive modeling between carriers and their agents.

How important do you consider sophisticated underwriting/risk selection and rating/pricing to be as a driver of performance or success in today's market for the following lines?