ACCA Applied Knowledge · Business and Technology · The impact of advances in technology
An insurer uses a system that examines customer claims history and then suggests the premium to quote and the offers to make to each customer in order to maximise profit. Which type of analytics does this represent?
This is prescriptive analytics because the system recommends specific actions, the premium and offers, to achieve a goal of maximum profit. Predictive analytics only forecasts likely outcomes and descriptive analytics only summarises past data, so neither recommends action.
- APredictive analytics
- BDescriptive analytics
- CPrescriptive analyticsCorrect
Explanation
Prescriptive analytics goes beyond forecasting by recommending specific actions to achieve an objective. Predictive analytics would only estimate what is likely to happen, such as the probability of a claim. Descriptive analytics summarises past events.
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