Insurers’ decisions often made in silos, study finds

A global survey of insurance industry leaders reveals that many say they are making decisions for their business in isolation, with limited awareness of the broader consequences. The study from Risk.net and sponsored by data and analytics leader SAS found a number of indicators that insurance decision makers are often working in silos - whether by choice or due to obstacles within their organizations.

In Breaking Silos: Agile Insurance in an Uncertain World, nearly 4 in 10 respondents (38%) said they aren't sure their organization has a comprehensive, real-time view of risks, revenue and costs. The survey is not without encouraging findings: 85% of respondents say their organizations have a clear vision and strategy for success, and they mention data and analytics, AI and digital platforms as top technology investment priorities - indicating that the industry is acting on the need for more connected decisions.

The overarching theme, though: There's work to be done to build resilience.

"This research shows an industry struggling to adapt to mounting pressures from multiple angles," said Philip Harding, Global Head of Commercial Content at Risk.net. "In addition to climate change, cybersecurity and regulatory uncertainty, insurers face growing cost pressures and difficulties in hiring and staffing. Altogether, it's an environment that demands adaptation, innovation and - as the report title suggests - collaboration, so all areas of the business know they are pulling in the same direction."

Identifying gaps in decision making

The report - which is accompanied by an interactive data dashboard that allows for segmenting data by geography, organization size and more - surveyed 350 senior insurance leaders from around the world, followed by a series of interviews. The questions examine how insurers are responding to challenges including climate change, cyber threats, regulatory uncertainty and wavering customer trust. From their responses, a few key themes emerged:

Room for improvement in alignment. As noted above, a large majority of respondents feel their companies have a plan for success. But 38% are not confident that the structure, processes and technology are aligned to support that strategy. Further, while poor data quality is seen as the biggest obstacle to robust decision making (41%), it is closely followed by lack of collaboration and confused ownership, each at 36%.

Many decisions are still not data-driven. In claims management, over 40% say decisions are based more on gut feel than on detailed analytics. Other areas report being more data-driven; in financial management and regulatory reporting, more than 70% say decisions are informed by analytics.

Insurers face familiar challenges. The strategic challenges most frequently named by insurers are the same ones every industry is facing: economic uncertainty (55%), regulatory change (41%), technological innovation (35%) and cost pressures (34%). And among technology and data leaders, 60% point to budget constraints as their biggest challenge - perhaps shedding some light on why analytics solutions are not more widespread.

"As usual, the hardest part in moving from a disjointed group of teams to an intelligent enterprise is the data," said Franklin Manchester, Principal Global Insurance Industry Advisor at SAS. "Technology such as AI can help, but a disparate technology investment is a poor substitute for a cohesive business strategy. That's reflected clearly in this research: The path forward has to be adopting and championing a cohesive approach."

A challenge and an opportunity

While the organizational alignment for insurers may not be where it could be, technology offers the possibility to address that issue. Respondents and interviewees note multiple opportunities for AI, machine learning and advanced analytics to improve data quality and cross-functional alignment and to streamline fragmented processes.

"Insurance companies that use the power of data and AI can expect ongoing improvements in customer satisfaction, operational efficiency and financial performance," says Thorsten Hein, Global Advisor for Product Innovation in Insurance at SAS. "These innovations pave the way for long-term success."

Dive deeper into the report: Join the webinar discussion

Registration is open now for Breaking the insurance silos: Driving profitability and agility, a companion webinar to the report taking place Wednesday, Nov. 19, at 9 a.m. ET, featuring an expert panel with representatives from AXA, Bupa Hong Kong and SAS and moderated by Deloitte. They will discuss trends in the global insurance sector; how emerging technologies can help balance cost, revenue and risk; and where AI can improve the quality of models and decisions.