Analytics Emerge All Around the Enterprise
Insurance Networking News, July 1, 2009
Moreover, Rose asserts that insurers will need to cultivate analytic skills from within as the industry will be fighting other industries for best analysts emerging from colleges.
DATA QUALITY
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However formidable, the personnel challenges are not the only the impediments to the dispersion of analytics throughout the enterprise. Issues of data quality need to be addressed. Data culled from legacy systems can sully an otherwise pristine model. "Data quality is a huge issue," says Parks. "If it's not correct, you can make wrong decisions."
According to Parks, analytic initiatives do have a tendency to ferret out flaws in how insurers store their data. "One of the upsides to analytics is that the more you use it, the more you understand how good your data is," he says. "As you become a more robust data user, almost by definition your data gets better because you find the problems and fix them. When things don't look right, it forces you to dig a bit deeper."
Craig agrees that the importance of data quality can not be overstated, but says the perfect should not be the enemy of the good. "No one believes their data is good enough," he says. "But what we've found is that it is never as good or as bad as they think."
Indeed, carriers may have already done a lot of the groundwork for analytics in previous data warehousing initiatives. While those that invested data warehouses may come out ahead of those that have not, issues will emerge.
So, where in addition to established areas such as claims and underwriting, can a carrier use analytics to improve efficiency to gain competitive advantage? One of the emerging areas is agency management and effectiveness. For example, a carrier may want to know which agents are requesting quotes but writing few policies. "We're seeing demand from customers wanting to analyze production," says Tom DiMarco, VP of Technology and Operations for Alpharetta, Ga.-based iPartners LLC.
Rose says he, too, sees more insurers employing analytics to gauge agency experience. "Previously, a lot of the metrics were around revenue and retention rate, without looking at customer profitability," he says. "Now, with the ability to dive deeper and actually analyze the customer and their value and lifetime profitability, they can better value the efficiency of their agents. The data is predominantly there."
Another area where Rose sees analytics making inroads is in product development. Innovative product offerings such as pay-as-you-go auto insurance need a strong analytic underpinning, he says.
While it's only over the past two or three years that analytics have become ubiquitous, the market is evolving rapidly. Some credit this to a greater awareness among senior management at insurance companies of the value proposition of analytics. Others note that the interest in analytics has risen as the cost of data storage has come down.
Another obvious explanation is competitive pressure. In areas such as personal lines auto, analytics are seen as table stakes. It's not yet that way in many commercial lines, but may soon be. One consequence of this pressure is that companies want more information, more frequently, and want to distribute it to more people within the enterprise.
"What we're seeing is that monthly isn't good enough anymore," says DiMarco. "People want to see their data on a weekly basis - in some cases daily."
Lauren Belfiore, director of operations for Springfield, N.J.-based Riders Insurance Co., says the insurer gets monthly reports from iPartners, but is considering going from monthly to weekly.
"With the market the way it is, you need to be on top of your data as often as possible," she says. "I think daily is a bit of overkill, but everybody wants to analyze the data as quickly as possible."
Parks agrees that given the competitiveness of the marketplace, if carriers are not at the tip of the spear when it comes to analytics, they should at least be somewhere high up on the handle.
"Our take is that if you don't take advantage of the technology, you'll pretty quickly lose ground," he says.
(c) 2009 Insurance Networking News and SourceMedia, Inc. All Rights Reserved.
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