Predictive Analytics in Insurance: The Basics | Intellectsoft

Updated: October 27, 2020

The technological landscape changes, and so the industries do. Even though the businesses are cautious of trying costly automation tools, there are some enhancements warmly welcomed by everybody in the sphere. And the improved data management under predictive analytics is one of them.

When it comes to the limits of predictive analytics in insurance, the main concern is on the extent to which the sphere can apply artificial intelligence in its daily operations. Throughout the years, insurance was not eager to introduce new technologies.

However, some technical improvements have shown their benefits, especially car sensors, telematics, and social media software. Thanks to these know-hows, it’s possible to discuss the role and application of predictive analytics in the insurance industry today.

What Is Predictive Analytics?

In essence, predictive analytics is an analytical tool that keeps track of historical records. By searching for connection and logic in these data sets, it forecasts upcoming events.

In practice, applying predictive analytics aims to reach the entire business's higher profitability and the effectiveness of its common practices.

Using and drawing models from the set of data, algorithms, and machine learning practices, predictive analytics enables to calculate the likelihood of certain events and the possibility of certain types of customer behavior.

This peculiarity makes this analytical tool highly attractive for businesses, promising them the greater competitive advantage and ability to feel the trends coming. And the key actors in the insurance sector also acknowledge these perks and incorporate predictive analytics into their daily practices.

The role of predictive analytics in the insurance industry

The surfeit of data makes the insurance industry a perfect sphere for predictive analytics implementation. In particular, this tool helps to construct basic patterns and get fundamental insights about the insurance business and manage the complex relations between agents and clients.

Mainly, predictive analytics is used in insurance for forecasting customer behavior. Precisely, the process involves collecting information from various communication channels, interactions with clients, agent feedback, and smart home systems. From all these sources, the analyst gets the raw data to define and improve existing relationships.

In practice, better claims management and clearer underwriting services are the main improvements that predictive analytics brings to the insurance industry. With the application of artificial intelligence, machine learning, and behavioral intelligence, it turns the sphere into a data-driven, predictive, and efficient system.

The common areas for the predictive analytics process

Among all, the appropriate planning of a predictive analytics introduction ensures the insurer will experience all the benefits of this tool. That’s why you should pay precise attention to the areas of implementation. This way, you’ll get the most profit and effectiveness boost.

In essence, the most profitability comes from incorporating predictive analytics into claims management. Also, managing underwriting services will work well.

Start working with these two dimensions while establishing your predictive analytics process. Also, consider the nuances of life insurance and health insurance before building the predictive analytics process.

Predictive Analytics in Life Insurance

In life insurance, key industry actors mostly use predictive analytics to work with Big Data and track any valuable connections. In this context, the insights that are driven from this processing include better addressing of common concerns. They include sophisticated bureaucracy around underwriting and extra time spent on registration.

At the same time, purchases are the blind spot for predictive analytics in life insurance. There exist some difficulties with their modeling because of the lack of needed data in low-frequency periods. That’s why the key emphasis in life insurance analysis is on fixing the underwriting process to date.

Predictive Analytics in Health Insurance

Among all, predictive analytics in health insurance supports the key industry actors, like health agencies, hospitals, and medical providers. Its main improvements refer to the areas of business operations, operation accuracies, and treatment adjustments.

Specifically, the application of real-time reporting ensures timely and precise adjustments to the changing environment, including fast adaptation to the changes. At the same time, Deloitte’s report on using predictive analytics in health care warns of possible moral hazards of promising risk control. That’s why the application of this analytical tool calls for maximum caution.

How to get the most from the use of predictive analytics in insurance

Predictive analytics promises two main advantages for the insurance sphere: cost-effectiveness and problem-solving. That’s the reason why this tool is mostly associated with higher profits and better sales figures. However, you won’t be able to enjoy the full package of its advantages without knowing how to apply predictive analytics correctly in the exact insurance areas.

Predictive Analytics Sample Project in Insurance Claim Management

Since predictive analytics brings the most money to insurance businesses by managing claims, we highly recommend incorporating this tool as a project. By this, we mean working with data sets by adopting the “predict and act” approach, incorporating the tools in several stages, and setting effective KPIs.

Among all, by applying predictive analytics, you’ll create the background for better customer experience, greater operational excellence, and improved risk management. For the proper start, IBM Software report recommends adopting a “predict and act” approach to business decision making. It means getting clear answers to 3 questions:

How are we doing? (Meaning what the insurance company thinks of itself and what its clients assume)
Why? (The answer comes from user-driven top-down analytics and data-driven bottom-up analytics)
What should we be doing? (Matching individual level and portfolio level).

With the right and timely answers, you’ll get the sustainable ground for taking effective action from the already connected data. This will let you pass five key decision points:

First notice of loss,
Additional information request,
In-depth investigation,
Payment and closing, and
Subrogation.

Finally, to track your progress, we recommend setting the following KPIs:

Reserve adequacy,
LAE,
Fraud avoided,
Investigator efficiency,
Amount subrogated,
Number of products per policyholder,
Customer retention, etc.

Predictive Analytics in Insurance Claims

While claims management is already an integral part of the insurance routine, predictive analytics improves and significantly accelerates its processing. In particular, it enables high client personalization with the clear perks of better time management, cost optimization, and resource control.

These preventive measures ensure customer satisfaction, and the very chances claims will appear in the future are low. Simply put, the longer you use predictive analytics to manage insurance claims, the fewer claims you get in the future.

Outlier claims, as a special dimension in claim management, are also handled by predictive analytics effectively. In this case, the tool ensures cost-effectiveness by preventing expensive losses, thanks to the enhanced automation and similarity check. From a long-term perspective, this kind of digitalization enabled effective planning and informed decision-making.

Predictive analytics in the insurance industry: Steps to take

To make sure that predictive analytics in insurance will reveal its best, use this checklist on the necessary measures and tools. There can be many more steps, but these four actions are basic and inevitable.

“What-if” Modeling, or an Alternative Method for Predictive Analytics in Health Insurance

“What-if” modeling is one of the most effective tools for underwriting preparation. In particular, it helps you check the underwriting workload, produce the registration process, and measure the impact.

Do Market Research

Market research is a critical part of any project strategy. So, don’t hesitate to use enhanced predictive analytical tools to determine your target market. Your data will include behavioral patterns, demographic aspects, and other important characteristics. Everything you need will be on social media, mostly.

Determine the Customer Loyalty Opportunities

Branding activity is an important part of any strategy, and predictive analytics can help here. In this case, your focus here should be on defining and analyzing their needs. An ability to address customer pains in the best manner possible will contribute to your future steady market success.

Determine KPIs

Working with measurable performance indicators makes your business problem achievable. That’s why you should set KPIs as the must-have stage in working with predictive analytics. Use the already collected data to understand your starting points and the milestones you’re about to reach. For example, KPIs for claims management can include reducing claims cycle time, customer satisfaction improvements, fraud control, claim recovery optimization, and savings.

Predictive analytics: Use cases in insurance

There are many good examples of predictive analytics in the insurance industry. In particular, it showed itself effective for data collection, risk management, product optimization, behavioral intelligence, Big Data analysis, and timely resolution of claims. In this section, we’ve collected the top 4 use cases of predictive analytics in insurance.

Pricing and Risk Mitigation

Data insights driven from firsthand information make the decision-making more effective. That’s because the availability of numerous sophisticated data sources enables drawing valid conclusions about customer behavior. Social media posts, smart technologies, and claims are by themselves highly reliable reference points. And the ability to collect and analyze them together in one place provides numerous advantages to insureds.

Customer Care

The great benefit of predictive analytics is in its power to save clients you’re about to lose. The data insights can track visitors who are unhappy or don’t use the insurance service fully and address their concerns long before they become the reason for your breakup.

Fraud Prevention

Predictive analytics has already started handling fraud risk effectively. In this context, social media serves as the perfect source for collecting insights and addressing threats.

Trends Tracking

Predictive analytics can help you keep a competitive advantage by keeping an eye on and notifying about emerging trends. In practical terms, insurers can arrange new products, design customer experiences, and incorporate necessary technological solutions.

Need to empower your insurance company with predictive analytics? Intellectsoft has created impactful solutions for EY, the London Stock Exchange, and EuroAccident. Explore what we offer for the insurance industry.

The hospitality industry depends a lot on keeping customers happy, but it’s getting harder to attract and keep them. The pandemic hit this industry hard, and now market competition is tougher than ever, with competitive offerings swaying customers. Hospitality businesses are willing to spend big to win customers back. The main questions for many are: how can we stay ahead of the competition, keep our customers, and increase revenue? Keep reading—we’ve got some answers.

Customers today have so many options that getting their attention is a real challenge. It’s not easy to make them choose your business over others. What worked 10 years ago doesn’t work the same way now. Back then, people often chose businesses based on reputation. But with new types of businesses (boutique hotels, craft cafes) popping up or big enterprises getting a new strategy, expectations have changed. The good news is these businesses have shown what works: great customer service. They focus on personalizing the experience, making things easy for customers, offering loyalty programs, and using smart technology.

In this article, we’ll explore these tech strategies and show you how they can help your business grow, and double the revenue. Keep reading to learn more!

The Importance of Customer Satisfaction in the Hospitality Industry

Customer satisfaction, which equals exceptional customer experience, is the backbone of the hospitality industry. It plays a central role in driving revenue and loyalty, as satisfied customers are more likely to return and recommend a hotel, restaurant, or other hospitality business to others. In fact, a study by the Harvard Business Review found that a 1% increase in customer satisfaction can lead to a 0.5% increase in revenue. Moreover, loyal customers are more likely to forgive mistakes and continue doing business with a company, even if they experience a negative encounter.

Let's quickly review the challenges the hospitality industry is facing right now so we can move on to the solutions and our case studies.

Challenges in Hospitality

As businesses navigate the changes in the hospitality industry, there are some key areas where a little improvement can go a long way. From improving customer service to embracing digital transformation and tackling labor shortages, we’ll take a closer look at today’s biggest challenges—and, more importantly, how technology can step in to help. Let’s get started!

Poor Customer Service

Even with strong and high-quality business offerings, poor customer service can drive potential customers and existing customers away. Common issues include:

Long wait times in customer service queues (it is worth remembering that our attention spans 8 seconds, and we live in a very busy world, so quick and efficient responses are more important than ever.)
Poorly trained customer service representatives
Lack of follow-up
Services not being done properly or quickly
Recall issues that require multiple service calls

These problems can frustrate customers. But, at Intellectsoft, we believe that the right approach, combined with technology, can address them effectively.

Digital Transformation Gaps

Approximately 50% of hotels are adopting new technologies, with 43% automating repetitive tasks and 39% upgrading existing systems.
Source: workstaff.app

Source: workstaff.app

While many businesses are adopting digital solutions, some still struggle with outdated systems and fragmented data. Legacy companies often face chaos when trying to manage their data and create new systems or add features.

Some of the recent examples include clients coming to us to create AI solutions for their services while their data simply was not ready for the advanced tasks. We advise stepping back, communicating with a company objective, and working on keeping the data clean (centralized, structured, and segmented).

When we’re asked to create advanced systems using AI, we always emphasize the importance of organized data. To train AI and build such complicated systems that truly work, you need to start from the very beginning—collecting, storing, centralizing, and organizing it. We encourage our clients to align all departments to work internally on the data so we can create a unified digital system that delivers personalized experiences.

If you’re unsure where to start with your data, we can help. Collecting feedback at various touchpoints along the customer journey is crucial for gaining insights into customer satisfaction and loyalty. Book an IT consultation with us, and our experts will guide you in mapping out a path to get more from your data and build a system that works for your business and team.

Reskilling Staff

The pandemic hit hard in early 2020, especially for the hospitality and travel industries. Even five years later, many businesses are still feeling the impact. Recruiting and retaining skilled staff has become a major challenge post-pandemic.

Reskilling to address technology’s impact is of utmost importance, as about 40% of hotel General Managers place it among their top three workforce challenges.

Source: Deloitte

We strongly believe that adopting the right technology can help. For example, creating an app to train your staff not only saves time but also ensures consistency in learning. AI assistants can also work alongside your team, helping with tasks like recruitment (providing industry insights, crafting emails) and staff training. Imagine having an app dedicated to making your team’s work easier and more efficient!

How Technology Tackles These Challenges and Supports a Customer-Centric Hospitality Culture

Automation, AI, and similar technologies may threaten many. However, the debate about replacing humans isn’t about that—it’s about cooperation and working hand in hand with technology to achieve the highest standards and establish brand-new “golden standards.” Technology is here to assist staff in listening to and collecting customer insights from data.

Let’s review some of our cases to see examples of how technology helps improve customer experience and supports customer service.

Examples of Intellectsoft projects

Property management systems (PMS)

We created a web platform and mobile app that makes managing daily tasks easier and offers extra services to improve residents’ experience. It gives a clear overview of daily activities and helps with managing units and users. Residents can easily book amenities, submit service requests, and report incidents. The platform also includes features for equipment management, key instructions, workflows, and custom permissions. This makes it easier for staff to stay on top of equipment and ensure residents have all the information they need. Plus, tools like announcements, quick votes, a forum, and a community calendar help build a connected and engaged community.

Guest Experience Management App

Our next app helped our client improve their guest experience by replacing printed marketing materials and the need for phone calls with a smart solution. Now, guests can easily order in-room dining, make reservations, and interact with staff— through a simple tablet in their room. The solution includes three parts: a custom in-room tablet with a variety of services, an admin panel for hotel staff and service providers, and a backend system that connects everything together. This approach makes things easier for guests and staff, improving both convenience and efficiency.

Existing Customers First: Building Loyalty with Personalized Touchpoints

Keeping existing customers is not just a strategy; it’s well-known that retaining existing customers is more cost-effective than acquiring new ones. In fact, research shows that it costs five times more to acquire a new customer than to retain an existing one. KPMG named customer retention as the number one revenue driver for the company.

Moreover, a 5% increase in customer retention can lead to a 25% to 95% increase in profits, showing the significant impact loyal customers can have on a business’s bottom line. Retention strategies, like personalized experiences and loyalty programs, can foster long-term relationships and generate recurring revenue, ultimately making them an invaluable part of any business model.

Personalization: How Technology Can Help?

Everyone loves to feel special—it’s part of being human. In hospitality, personalization has evolved from being a luxury to an essential standard. With the right technology to manage your data effectively, you can deliver those “wow” moments that guests won’t forget.

More than half of hotel chains are already using personalization features on their websites, booking platforms, and apps, and another 39% are planning to follow suit soon. They’re tailoring experiences to fit guest preferences perfectly.

Source: Deloitte

How does technology make it happen?

CRM Systems: They help you keep track of guest preferences, booking history, and special requests so you can offer services tailored just for them.
Loyalty Programs: Personalized rewards and offers show your guests that you value them, keeping them coming back for more.
AI Personalization: AI analyzes guest data to predict what they’ll love (from room upgrades to local recommendations) before they even ask.
IoT Gadgets: Smart room features like voice-activated assistants, or temperature controls adjust to your guests’ preferences, making their stay more comfortable.

With tech-powered personalization, you’re building loyalty and maximizing the lifetime value of every customer.

Our Case Study: Smart Hotel Management & Loyalty Program

For one of our clients, we created a smart room solution, complete with a custom IoT system. Guests can use a mobile app to control services, explore amenities, and find resort information-- with a special touch to their suite type. For the client’s entertainment business, we improved their legacy software by running a full IT and code check, fixing issues, and making the system better for customers.

Along with that, we developed a mobile app for the loyalty program, allowing businesses to effortlessly reward their customers and keep them engaged with exclusive benefits.

Our solutions not only helped the client with special experiences for guests; it also improved operations, cutting costs by eliminating inefficiencies. Here's what our experts shared:

"We transitioned away from ESB (Enterprise Service Bus) systems, which previously cost millions, and replaced them with more efficient, self-managed solutions. Similarly, we’ve implemented Device Farms that improved operations and saved resources."

Leveraging Software to Increase Upsell Opportunities

Here are some examples of tech tactics that will help your team sell more and introduce new offerings to existing customers, improve overall efficiency leaving your team grateful:

Dynamic Pricing Algorithms

For finance and marketing teams, manually calculating pricing by segment to introduce your clients can be incredibly challenging. AI-powered tools can strongly optimize these strategies by analyzing your database in detail.

Upselling via Apps

Boosting revenue in the hospitality business often comes down to personalized experiences. Imagine this: a guest books a room, and then your app suggests a spa package or a room upgrade at just the right moment. Later, it nudges them to book a dinner reservation or a guided tour designed to their preferences. With apps offering these personalized recommendations during and after bookings, you’re not just increasing your revenue per guest but also skyrocketing their experience. And you do it in a sustainable way, not by speculating, but by offering what your customers desire based on their previous experiences. It’s a win-win: seamless, helpful, and far from pushy.

Inventory and Resource Management Software

Making every resource count in your hospitality business is key. Inventory and resource management software allows you to effortlessly track everything from linens to room availability, ensuring nothing goes to waste. Having real-time insights to reduce overstock, avoid shortages, and optimize operations assists sustainably keep everything under control and know what you need to focus more. It helps maximize room occupancy by aligning bookings with available resources, ensuring every room and item is used effectively. This approach leads to smarter management, better guest experiences, and a noticeable boost to your bottom line.

Adopting these strategies not only optimizes your operations but also drives business growth. Ready to discover how technology can elevate your goals? We’re here to create a tailored solution for you.

Steps For Implementing a Customer Service Technology Solution

Improving customer service in hospitality doesn’t have to be a daunting task. With the right technology, you can smooth the path of your operations, speed up response times, and elevate the overall guest experience. Here’s where you can make it happen:

1. Understand Your Needs

Start by identifying the challenges your business is facing. Are you struggling to manage high volumes of inquiries, track customer feedback, or personalize the guest experience? Pinpointing your needs will guide you to the best solutions.

2. Pick the Right Tools

Choose technology that aligns with your goals. Look for solutions that are scalable, easy to use, and integrate effortlessly with your current systems. Options like CRM software, live chat tools, or a guest experience app can make a difference.

3. Equip Your Team

Technology is only as effective as the people using it. Train your staff to make the most of the new tools, so they can deliver exceptional service and resolve issues quickly. Confident, well-equipped staff creates happy, loyal customers.

4. Keep Improving

Once implemented, monitor how well the solution works. Are response times improving? Are customers more satisfied? Regular evaluations will help you fine-tune your approach and keep things running harmoniously.

Some Tech Ideas for Hospitality Businesses

CRM Software: Manage customer interactions and preferences.
Guest Experience Apps: Delight guests with personalized experiences right at their fingertips.
Amenity Management Systems: Simplify operations for everything from room service to facility bookings.
Helpdesk Software: Resolve customer issues optimally.
Live Chat Tools: Offer instant support and answers.
Social Media Management Tools: Keep customer interactions engaging and organized.

Integrating these strategies will not only improve your customer service but also deliver unforgettable customer satisfaction, loyalty, and, ultimately, your bottom line. Ready to take the next step? Book a consultation with our experts.

Conclusion

To wrap up everything we've discussed, customer satisfaction and experience are at the heart of hospitality. Retaining customers is more than just keeping them around—building strong, long-lasting relationships and consistently meeting their evolving needs. By understanding their pain points and offering personalized solutions, you can inspire loyalty and drive progress. With the right technology and continuous improvement, your business can stay ahead, let go of what no longer serves you, and keep growing.

At Intellectsoft, with over 17 years of experience in software development, our expert team is ready to help. We create everything from mobile apps to full-fledged portals and systems, leveraging the latest technologies like AI, Cloud, and Machine Learning. With deep experience in the hospitality industry, we’re here to craft personalized solutions that bring your business unforgettable customer experience and retain your valuable clients.

Ready to double your revenue and level up your customer retention strategy with personalized technology? Contact our experts, and we look forward to working hand in hand with you to build or revitalize the perfect app or system for you.

Tetiana Borysova

Content Writer

What Is Predictive Analytics in Insurance and How to Use It

What Is Predictive Analytics?

The role of predictive analytics in the insurance industry