Return on Information – The new ROI.

Data is often seen as a competitive differentiator, however in today’s big data environment does having too much data become a problem? To overcome this problem, for a growing number of organizations, the answer lies in taking advantage of distributed processing technologies such as the Hadoop file system (HDFS). Hadoop is an open-source software framework for running applications on a large cluster of commodity hardware.  Since Hadoop runs on commodity hardware that scales out easily and quickly, organizations are now able to store and archive a lot more data at a much lower cost.

This is good news for IT departments, but it should also be music to the business professional’s ears. No longer does data need to be destroyed after its regulatory life to save on storage costs. No longer does the business analyst or data scientist need to limit his data analysis to the last three, five or seven years. Now insurers can store and analyze all their historical internal and external data.

Another advantage of capturing data in Hadoop is that it can be stored in its raw, native state. It does not need to be formatted upfront as with traditional, structured data stores; it can be formatted at the time of the data request.

Insurance companies need better application and tools to consume data and make it more meaningful, insightful and use.  Given how data is growing exponentially and while still relatively new and maturing a significant number of insurance companies are investing in big data technologies like Hadoop.

Data can be the difference between success and failure. Better data leads to better decisions, which ultimately leads to more profitable business. Today, the return on information is just as important as the return on investment. To learn more how insurers are getting value from data, download the white paper “Return on Information – The new ROI”

I’m Stuart Rose, Global Insurance Marketing Principal at SAS. For further discussions connect with me on LinkedIn and Twitter.

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What Do Insurance Companies and the English Soccer Team Have in Common?

As one of the most exciting World Cup draws to a close and having watched most of the games, I have come to the conclusion that England’s soccer team and the insurance industry have a lot in common.

England World Cup Champions

The English invented the game of soccer in the 1800’s. For a long time, they were seen as the champions of this sport peaking with their World Cup victory in 1966.  However, since that date, many other countries have vastly improved their techniques and overtaken them in terms of skill level and performance which is obvious because of England’s early exit from Brazil.

As for the insurance industry, it can be argued that they invented analytics. Since the 17th century insurance companies and underwriters have used historical data to predict or forecast future losses, whether in the early days of marine insurance or the first mortality tables. Despite this head start, the insurance industry is often seen as laggards in the usage of data and analytics when compared to other industries like retail, banking, hospitality etc.

Fortunately, insurance companies have a great opportunity to reverse this trend and become leaders in the analytical space. Today big data and analytics is transforming the insurance market. Telematics and crash-avoidance systems  are revolutionizing auto insurance. Carriers are using information from personal fitness bands to more accurately price life and health insurance. CNA is using analytics to prevent claims fraud saving them millions of dollars a year. Specialty insurers are using weather pattern data to analyze crop insurance. Finally in just six years AIG have dramatically improved their profitability using analytics.

Insurers no longer view analytics as a back-office function. It is now a strategic initiative with many carriers employing a Chief Analytics Officer or Chief Data Officer. By using data proactively, carriers can better understand their business and again become leaders in analytics.

Now, how can England’s soccer team improve and become World Cup champions again? This is an entirely different and certainly more difficult proposition to resolve. Being the eternal optimist, I cannot wait until 2018 when England will (hopefully) once again be pronounced World Champions.

I’m Stuart Rose, Global Insurance Marketing Principal at SAS. For further discussions connect with me on LinkedIn and Twitter.

PS – My editor told me to use the term soccer even though it’s really called football.

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Testing…123…What, why and how of A/B testing

What is better to ‘Purchase’ or ‘Buy’ a product? These are questions that retailers are asking themselves especially in regards to online marketing. As insurance companies embrace digital technology they are facing similar questions as they try to maximize their marketing efficiency. To help improve response rates many insurance companies are using A/B testing.

The “What?”
The concept of A/B testing is really as simple as it sounds. It’s a method of comparing two or more different versions of something (e.g. a website, campaign, product etc.) to determine which version of the more effective.

The “Why?”
The most basic reason for doing A/B testing is that you do not know what you don’t know.

The “How?”
There are a lot of different A/B testing tools out there. The most useful ones, however are part of a campaign management solution. Let’s say you’re designing a campaign and you need to decide which offer you should include. By incorporating A/B testing into your campaign design process, you can determine which offer should go to which segments to produce the desired results, or which channel or combination of channels you should use etc.

A/B Testing often starts with a champion versus challenger group. The champion group is the control group. All challenger groups are compared with the champion group, with the goal to outperform that group.

The bottom line is that A/B testing can give you more confidence in your marketing because it provides an analytical way to choose the right message for the right customers at the right time using the right channels.

To learn more download a point of view paper that explains in greater detail the power of A/B testing.

I’m Stuart Rose, Global Insurance Marketing Principal at SAS. For further discussions connect with me on LinkedIn and Twitter.

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Five keys to marketing analytics excellence

Marketing is all about finding the most profitable growth opportunities in your data, knowing where to place your bets, taking the best marketing action and ultimately maximizing the cross-business influence of every dollar you spend. It’s not easy to do. But insurance company, USAA, has proven when marketing analytics used wisely can return impressive results.  Doug Mowen, Executive Director, USAA, shares his five keys to marketing excellence.

Key Insight 1 – Define success: Which insights would promote data-driven decision-making?
It’s critical for key stakeholders to clearly define “What is that you are trying to accomplish?” and “What is success?”. For example, number of expected responses from a specific marketing campaign.

Key Insight 2 – Target carefully: Understand your customers and what drives their behavior.
Demographic variables give you a good idea of what the customers look like, but USAA has found that behavioral data is a much better predictor. For example, event-driven data such as marriage, moving house or having a baby.

Key Insight 3 – Align resources: Understand who and what is available and know the limitations.
It’s important to assess budgets and determine if you want to create a comprehensive campaign using all marketing channels, or for a limited budget just focus on a few customers via one channel.

Key Insight 4 – Measure carefully: Determine the incremental benefits of your initiatives.
While first key to marketing excellence focused on defining success, the fourth key, measure the success and is essential. USAA uses a control versus exposed approach to measure the incremental value of its marketing analytics.

Key Insight 5 – Build creditability: Certify and clearly communicate your results.
If you can clearly support and share your analytics results, you will be much more successful at building a business culture that relies on facts to make decisions.

In a recent survey by analyst firm, Strategy Meets Action found that 56% of insurers are initiating marketing analytics projects. To help improve your chances of success with these new initiatives download the conclusion paper “Five keys to marketing excellence” detailing USAA marketing success.

I’m Stuart Rose, Global Insurance Marketing Principal at SAS. For further discussions connect with me on LinkedIn and Twitter.

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Mythbusters – Why analytics is a collaborative affair.

Data and analytics are integral to running an insurance company. But insurers face a number of challenges as they embrace analytics, specially finding a home within the organization for analytics. Does analytics live within IT or within the business units?

SAS recently sponsored a survey by IDC, “The CIO’s Chance of a Lifetime”. This reports debunked 4 common myths about ownership of analytics in an organization.

Myth 1 – IT controls all things data

  • The report found that the CIO does not hold a monopoly on all things “information”. Analytics teams are increasingly headed by new leadership roles, e.g. Chief Data Officers, that are separate from IT. Only 15% of analytics projects are solely determined by IT.

Myth 2 – Technology poses the biggest challenge

  • Many insurance companies are struggling to understand the value of big data and implementing the many advancements in technology. But the greatest stumbling blocks to analytics projects are organizational mindset and culture.

Myth 3 – Everyone understands the value of analytics

  • Nearly every organization believes in the business value of analytics, however few organizations are able to quantify the benefits.

Myth 4 – You cannot have analytics without IT

  • Based on the findings from the survey IDC found there is disconnect between IT and lines of business as to the helpfulness of IT in analytics.

The reality is that the IT and business relationship needs to continuing evolve. The business units had better be on really good terms with IT – and the IT team needs to better understand the business questions and context.

Big data and analytics presents a unique opportunity to transform the insurance industry. Take this survey to help SAS and analyst firm, Strategy Meets Action, understand the maturity level and usage of big data analytics within insurance.

I’m Stuart Rose, Global Insurance Marketing Principal at SAS. For further discussions connect with me on LinkedIn and Twitter.

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Five things insurers can do to expand analytics use

The fundamental principle of insurance is risk assessment and pricing. Traditionally these have been the areas where actuaries and insurance companies have used analytics to gain competitive advantage.

Today, the challenge for many insurance companies is how to apply analytics to solve broader business problems? How do you get business units, like underwriting, to adopt this technology? In a recent panel, at the SAS Financial Services Executive Summit, two insurance leaders discussed some successful tactics that you can use get your organization on board.

1.      Sow the seeds of innovation

If you want to expand analytics within your company, set up an environment where new ideas can flourish, according to Kimberly Holmes, Head of Strategic Analytics at XL Group.

When it comes to innovation, “there are no bad ideas,” she said. “We need to think of innovation as ideas that go into an incubator. Some ideas germinate and grow while others stay stagnant for a long time.” It’s easy to find reasons on why you can’t do something. Instead, focus on what you can do. Look for what is possible, Holmes said.

Paul Friedmann, Divisional Senior Vice President at Great American Insurance Company, said his company creates innovation labs. One person from six departments in the organization meet for six weeks to solve a particular business problem using data and technology.

2.      Federate your data

Analytics is only as good as the data it runs on. “We recognized federation of data was critical to us,” Friedmann said. Great American knew early on it needed a platform to support large external data sets and navigation across both structured and unstructured data. This includes the underwriter notes and all of the documents underwriters pull into their evaluation.

3.      Keep an eye open for new data sources

In addition according to Friedmann, it is important to look beyond traditional data to find and evaluate new, untried data sources.

His company has a research team dedicated to investigating new opportunities. “We leveraged that team to become part of our underwriting and claims organization to help us find new data sources and provide information on the validity of that data,” Friedmann said.

Once a new source is found, the company brings in technology teams to help make that data accessible to analysts, actuaries, claims adjusters, underwriters and even agents. “We don’t want our analysts in business divisions to discuss different data marts,” he said. “We want them to think in terms of, ‘I’ve got a problem to solve which information best resolves that business problem.’”

4.      Involve your underwriters

Underwriters are essential to the success of any insurance company and if you want your underwriters to embrace analytics as part of the daily process, Holmes suggests letting them own the project.

“We involve our underwriters in every decision that goes into creating and implementing predictive models,” she said. “It is their model. We don’t tell them how to adopt the model. They create the business rules.” She emphasizes that she gets underwriters to commit to a loss-ratio improvement at the start of the project. This way, implementation doesn’t just confirm what underwriters already know – rather, it should provide a competitive advantage.

5.      Focus on short-term successes for a big win

Implementing an enterprisewide analytics program can be initially overwhelming. But small rewards along the way lead to a big payoff at the project’s end. Those incremental changes lead to huge improvements, Holmes said. For example, bringing one or two new data sources into your risk analysis can have a significant impact on predicting risk.

“You’ll be shocked at the benefits you can get from something simple,” she said.  The early successes at XL Group have encouraged broader adoption of the technology within the organization.

The adoption of analytics is on the rise within the insurance industry. No longer is it viewed simply as a back office function used by actuaries for risk and pricing. By following these five steps, insurers can embrace analytics to drive innovation within their organization. For more information on the usage of analytics with insurance download a copy of the Analytical P&C Insurer or Analytical Life Insurer white papers.

I’m Stuart Rose, Global Insurance Marketing Principal at SAS. For further discussions connect with me on LinkedIn and Twitter.

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Hanging on the Telephone – No Longer with Analytics!

Today’s world is about instant gratification, and people expect answers with the click of a button. Often you cannot find the information you need on Google or your mobile app. The next logical step is to call someone, but this can lead to frustration as we are left on hold for what seems like hours waiting for a response from a call-centre representative, resulting in a poor customer experience.

Staffing call centres appropriately is a delicate balance: having too few operators on duty risks customer dissatisfaction, while having too many is money down the drain.  Call volume forecasts tend to be inaccurate, as they do not take into account the effect of marketing campaigns or forecasted policies in force.  Nor do they predict the effect of external events such as the Superbowl, the Olympics or even hot weather which may lead to lower volumes of customer advice calls.

Contact centres are a direct link to an organization’s consumer base. In today’s customer experience environment, they are critical to success. This is one reason insurance companies are implementing analytics to optimize resource planning. This was the case with one insurance customer who had an 18 percent variation in their forecasts; on some days staff were working beyond their capacity, while on others they were incorrectly allocated. To produce more accurate forecasts, SAS analyzed three-years’ worth of call centre data in conjunction with both internal data and external data.

This customer can now build accurate 90-day scenarios to forecast not just call volumes, but also the different types of call to expect:  such as new customers, existing customers adding people to policies, or claims. These scenarios are flexible, so new information such as severe weather warnings, can easily be added for timely, relevant and accurate call volume forecasts. As a result, this insurance carrier forecast variation dropped 8 percentage points, with an estimated annual saving of millions of dollars on customer service resources alone.  Plus there are the intangible benefits. Customers are no longer left “Hanging on the telephone” as call-centre analytics provide a better customer experience for consumers who are accustomed to instant gratification.

I’m Stuart Rose, Global Insurance Marketing Principal at SAS. For further discussions connect with me on LinkedIn and Twitter.

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Discovering the X Factor.

Every organization is continuously looking for that “X factor,”  something that will differentiate them from their competitors. For insurance companies that “X factor” is often hidden in mountains of data. However, extracting value from this data remains elusive for many insurance companies. Decision makers – whether data analysts or senior-level executives – struggle to draw meaningful conclusions in a timely manner from the array of data available to them. Fortunately, the science of extracting insights from data is constantly evolving. Data visualization software, such as SAS Visual Analytics, which presents information in a pictorial or graphical format, is helping insurance professionals visualize things that were not obvious to them before.

A picture is worth a thousand words – especially when trying to understand and gain insights from data. For example, in the event of natural disasters such as hurricanes, tornadoes or even hailstorms, using data visualization is extremely advantageous.   Insurance companies can create geographical risk exposure reports by augmenting existing policy data with geospatial data to assess and monitor loss exposure by region. The same tools can even detect fraudulent claims by evaluating whether or not the damaged property was in the path of the weather event.

Don’t just take my word for it. Pavlos Kaskarelis, Vice President and CEO of major Greek insurer, Ydrogios Insurance says “With SAS Visual Analytics we can put data management and analysis at the heart of our strategic planning. Enhancing areas such as financial and risk management planning, new product design, underwriting, sales, actuarial and other critical functions of the company”.  In addition, there are many other insurance companies across the globe that are taking advantage of SAS Visual Analytics, some include XL Group, Generali Hellas, metafinanz.

The true value of data lies not just in having it, but being able to use it to gain real business value. Insurance companies taking advantage of data visualization software will uncover the “X factor”  much faster than their competitors.

I’m Stuart Rose, Global Insurance Marketing Principal at SAS. For further discussions connect with me on LinkedIn and Twitter.

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ORSA - The New Kid in Town

The insurance industry was one of the first economic sectors to be regulated – and it continues to be subject to close scrutiny by public authorities throughout the world. For the last 30 years, businesses in this industry have been bombarded with new and increasingly diverse regulations, all designed to ensure that insurers are financially stable. But in recent years, insurance has become far more complex and sophisticated. Many of the earlier regulations put in place can’t address new industry complexities.

For this reason, insurance companies around the world are facing a host of new regulations that go beyond simple compliance.   At the heart of many of these new regulations is the requirement that insurance companies perform an Own Risk and Solvency Assessment (ORSA) – a self-assessment of their current and future risk.

ORSA is a relatively new concept aimed at enhancing insurer awareness and understanding significant risks and interdependencies, as well as the impact of these risks on each company’s available capital and its own view of capital needs.

Many industry leaders consider Solvency II and ORSA to be a “game-changer” for the insurance industry, as these regulations represent an opportunity for insurance companies to demonstrate that they understand their own risks and liabilities. However, for many insurers, implementing these initiatives will be a major challenge. To better understand ORSA and help overcome these challenges download the white paper “ORSA: The New Kid in Town”.

ORSA and Solvency II signals a fundamental shift towards an enterprise risk management culture. However, these regulations demand a more comprehensive approach to risk management. Fortunately SAS provides insurers with an integrated framework to help  support the quantitative elements of ORSA. SAS was recently recognized by analyst firm Chartis Research as a category leader in Chartis’ RiskTech Quadrant® for Solvency II Technology Solutions.

The regulation of the insurance industry has long been regarded as an unnecessary hindrance.  Nevertheless,  those insurers who view ORSA and Solvency II as just another regulatory requirement will be at a competitive disadvantage to those who embrace the legislation to improve their business and long term future.

I’m Stuart Rose, Global Insurance Marketing Principal at SAS. For further discussions connect with me on LinkedIn and Twitter.

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Come Rain or Shine – Using Analytics to Assess Weather-Related Claims

From a weather perspective, the last few weeks have been very traumatic for many people around the globe. The United Kingdom is suffering from unprecedented flooding. Canada and the northern parts of the United States have experienced record low temperatures, with even Niagara Falls freezing over!  The South was also affected, when Atlanta, Charlotte, and Cary (SAS’ Global Head Office) came to a standstill as they were hit by snow and freezing rain.

When a natural catastrophe happens, much of the focus is on policyholders and the insured immediately impacted by the disaster. However weather plays an important role in many other areas of the economy such as travel, commerce, agriculture and manufacturing.  Based on the experience from the 2011 earthquake in Japan and floods in Thailand and because these events had such an affect on the supply chain, business interruption insurance has become a focal point for many insurers.

Link analysis software, is not new to insurance companies. Many have implemented this type of analytical software to detect and prevent organized claims fraud by going beyond transaction and account views to analyze all related activities and relationships at a network dimension.  However, this same software has great potential for analyzing business interruption insurance.  Using link analysis, insurers can better understand the ripple effect through the entire supply chain as well as which businesses they insure will be impacted by the supply chain disruptions. For example when Superstorm Sandy hit the New York area in November 2012, the power disruption affected 8 million business and households across 12 States. It would have been enormously advantageous for an insurance company to know all the businesses impacted by the power outages and potential business interruption claims.

In the past 10 years, many insurance companies have experienced extremely high loss ratios because of weather related events. The primary objective of insurance is risk management,.  Using data and analytics, insurance companies can better understand climate change and mitigate losses, particularly those associated with business interruption.

I’m Stuart Rose, Global Insurance Marketing Principal at SAS. For further discussions connect with me on LinkedIn and Twitter.

 

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