This article originally appeared in Latam Insurance Review.

For most property and casualty insurers today, including those in Latin America, there is a major opportunity to take their analytical capabilities beyond an actuarial group using traditional loss and underwriting data. High-performing firms take an approach that’s more expansive and practical, using advanced analytics to improve decisions in five areas.

First, companies are finding new correlations between target customer groups and risk. One property insurer decided to examine its book of business along a tropical coastline, and found a moderately strong correlation between coastal location and hurricane damage. However, once it dug deeper into other databases, the insurer discovered two factors that were even more predictive of damage. One was whether the property was built or rebuilt after Hurricane Andrew in 1992, when many local building codes were upgraded. Another was whether the property was built by one of a small group of high-caliber contractors in each city.

By focusing on these micro-segments, the insurer could write policies at a lower price than its larger competitors and capture the majority of these good risks, growing by more than 20%. It also identified sub segments that were not as attractive as initially thought; by raising the premiums for these prospective customers, it sent many of them to competitors. Subsequent hurricanes proved the value of its risk selection.

Read the full article here.