Advanced analytics is a game changer and the biggest risk to insurers is doing nothing with the data they collect.
That’s according to Kimberly Holmes, managing director of XL Catlin Group and XL Catlin Leadership Council, who explained the value of big data during a presentation on the subject at the International Association of Claim Professionals’ annual conference held recently in Sonoma, California.
Holmes said the insurance industry is undergoing a transformation and the need to innovate is most evident in the legacy systems and data problems that the industry has dealt with for years.
An IBM thought leadership article on big data in insurance pointed out that big data holds promise for insurers.
“With no physical products to manufacture, data is arguably one of their [insurers] most important assets. Financial, actuarial, claims, risk, consumer, producer/wholesaler and many other types of data form the basis for virtually every decision an insurer makes. And while the industry has made progress in capturing and analyzing much of the structured information associated with their products and policyholders, there is value in unstructured and semi-structured information that remains untapped,” wrote the authors, Michael Schroeck, global BAO big data analytics leader, and Rebecca Shockely, BAO global leader, IBM Institute for Business Value.
According to Schroeck and Shockely, “To compete and win in this dynamic environment, insurers must leverage and optimize the value of big data.”
There are many challenges facing the insurance industry today, including rising costs due to regulatory requirements, bad customer service experiences, a data deluge, emerging risks and changing demographics.
Recognizing these challenges insurers have invested $2.2 billion in insurance technology startups, Holmes said.
Data alone isn’t enough, there needs to be careful execution in its analysis because the only value in it, Holmes said, is when it translates to business decisions.
Insurers needs to excel at change, she said. A point highlighted in Schroeck and Shockely’s thought piece.
“It is increasingly clear that insurance companies must leverage their information assets to gain a comprehensive understanding of markets, customers, products, distribution channels, regulations, competitors, employees and more. Insurance companies will realize value by effectively managing and analyzing the rapidly increasing volume, velocity and variety of new and existing data. By putting the right skills and tools in place to better understand their operations, customers and new markets, insurance organizations will be on the right track to compete and thrive in this global, dynamic marketplace,” write Schroeck and Shockely.
In a 2012 white paper, What Does Big Data Really Mean for Insurers, Strategy Meets Action (SMA) authors identified three areas where insurers should already be pursuing big data analytics: customer service, risk and finance.
The authors, Deb Smallwood, SMA founder, and Mark Breading, partner, noted that insurers need to master data management and that, “Data must be seen as the valuable corporate asset that it is.” That means running a high performance analytics platform, the authors stated.
“The ability to rapidly analyze large volumes of both structured and unstructured data that come from a wide variety of sources demands a technology platform that is specifically designed for and dedicated to that purpose,” Breading and Smallwood wrote.
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