When insurers examine profitability at the customer level, they often attempt to segment customers and use summarized approaches. By comparison, predictive analytics enables insurers to use a real-time, granular approach to managing their businesses by helping them score and understand groups of customers. This also allows them to see how individual customers contribute to or erode profitability, resulting in an optimized position within a marketplace.
This article, published in Best’s Review, discusses the limits of traditional approaches and highlights the opportunities for predictive analytics to identify hidden profitability.