Life insurers are falling behind the rest of the financial services industry with their use of data analytics, according to Deloitte Partner Paul Swinhoe.

He says data analytics techniques can be used to profile and predict customer behaviour while looking at what impact they have on an insurer.

But lack of capability and resources in life insurance companies is holding back use of this research.

“To use this form of analysis, the insurer has to look for non-traditional sources of information such as social media, loyalty programs, credit-card spend and bank transactions,” he told an Actuaries Institute forum in Melbourne last week.

“The key issue is the reliability of the data.”

Mr Swinhoe says the data should be used to look for people who need to insure and are likely to buy a policy.

“Data analytics will help reduce the acquisition costs. We are looking for people who are buying so that makes better use of the insurer’s dollar.”

In underwriting, the data will deliver better consistency and create a less invasive sales process. It will also free underwriters to deal with more difficult applications.

He says data analytics makes better use of the budget in direct marketing and increases the opportunity of cross-selling.

“Analysis can be used to identify groups of customers displaying non-standard experiences,” he said. “There are also signs of an imminent lapses by looking at data of late premiums or repeated requests for surrender value.”

Mr Swinhoe says data analytics can also help an insurer identify the clients they want to keep and those they are happy to let go.

“You don’t want a portfolio of clients who are all about to lapse,” he said.

But he cautions that there are challenges with introducing data analytics into a life insurance business.

“The challenge is the data isn’t readily available and there are legal and ethical concerns as well,” he said. “But there are opportunities of making all the data an insurer has work better while also creating partnerships with reward card or loyalty programs.”

Mr Swinhoe says life insurers are looking seriously at data analytics to improve their business decisions, so he expects a scramble to secure sources of external statistics.

“It will become very important to know more about what your customers are doing.”