Consultants' Corner

Insurers Need CDOs to Maintain a Modern Enterprise

Frank Petersmark
Insurance Experts' Forum, December 13, 2012

In his November blog, Syed Haider made a strong case that the time had come for insurance carriers to name a chief data officer (CDO). Syed persuasively argued that there were far too many false starts and failed initiatives that fell under the rubric of business intelligence and advanced analytics, and that it takes a C-level position to help carriers leverage their vast information resources.

I’d like to provide a former CIO’s perspective on the need for a CDO specifically and for a more focused approach on the part of carriers toward their data and information assets generally.

When you start to think about the product of an insurance company in the broadest sense of the word—what they deal in—the one thing insurers produce above all else is information. A policy cannot exist, nor can a claim or commission be paid, without it.

But it might not be too much of a stretch to say that insurers have paid short shrift to data and information over the years, casually dumping it into proprietary data stores and un-editable file structures. Worse yet, insurers compounded these problems over the years by duplicating and copying the same data all over their organizations as a way to get around the inflexibility of many of their core systems. When they recently awoke from their long information slumber they realized that they had a lot of foundational work to do to improve the quality, reliability, and yes, the perception of the truthfulness of their data.

So what to do about it? One place to start is by seriously considering the leveraged value of information to the organization. If information is a financial asset, then its potential upside in terms of competitive differentiation and market agility should drive some pretty strong multiples. For other such assets in insurance companies—investments, reserves, or books of business – there has always been the kind of executive stewardship necessary to optimize the benefit of such assets.

Now it’s time to do the same with information and create the CDO role. It would be a big deal that would send a clear message to employees, customers, agents, and investors. The CDO would become the focal point for a carrier’s use of information as a strategic asset.

Converting data to information, and then to actionable analytics and modeling, is the next competitive frontier in the insurance industry. The CDO could drive this conversion by creating an ‘Information Strategic Plan’ that would clearly articulate the ultimate vision for information usage in the organization. He or she would translate that vision into action steps.

Insurers are often unsure where to start when it comes to reorienting themselves operationally around information and analytics as a strategic driver for the company. In the big-picture view it would be precisely the CDO’s job to help enable that kind of strategic thinking and orientation around executing a strategic initiative focused on information.

As Syed correctly observed in Part I of this blog, this is the Age of the Algorithm, and insurers that choose to discount or ignore that will do so at their own competitive peril.

Data rules. To rule data, you need a CDO.

Frank Petersmark is CIO Advocate at X by 2, Inc., in Farmington Hills, Mich., an enterprise architecture consultancy to the insurance industry. Previously, he was CIO and VP at Amerisure.

Readers are encouraged to respond to Frank using the “Add Your Comments” box below. He can also be reached at Fpetersmark@xby2.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

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