Demystifying analytics

word cloudThere is no doubt that analytics is an overused and often abused term. So what does really analytics means?

In part 2 of a series of articles on the analytical lifecycle, this blog will highlight some of the common and emerging techniques used to analyze data and build predictive models

 

Exploratory data analysis
The science of extracting insight from data is constantly evolving. But regardless of how much data you have, one of the best ways to determine important information is through exploratory data analysis. Some of the most valuable ways you can do this are:

  • Line graphs
  • Bar and pie charts
  • Scatter and bubble plots
  • Correlation matrices
  • Clustering

Predictive modeling techniques
To gain an edge in today’s competitive market, insurance companies need advanced analytics solutions that reveal hidden patterns and insights. A few of the most valuable predictive modeling techniques are:

  • Regression models
  • Generalized linear modeling
  • Decision trees
  • Forecasting

Emerging analytical techniques
The digital age has brought with it a quantum increase in the amount of data available to companies. The vast majority of new data being created is semi-structured and unstructured data, both of which require new analytical techniques to generate insights. Several of the most important, emerging analytical techniques used to analyze big data are:

  • Link analysis
  • Textual analytics
  • Word clouds
  • Sentiment analysis

Analytics is no longer a luxury. It has become fundamental to the success and growth of insurance organizations worldwide because it supports better decision making about customers, prices, offers and more. The key is turning the massive amounts of data your company has collected – and continues to collect – into timely, trusted insights and competitive advantage. The best way to do this is through proven analytical techniques. To learn more about the available analytical capabilities download the white paper “Demystifying Analytics: Proven Analytical Techniques and Best Practices for Insurers”.

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

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Data is King

In my last blog I detailed the four primary steps within the analytical lifecycle. The first and most time consuming step is data preparation.

Many consider the term “Big Data” overhyped, and certainly overused. But there is no doubt that the explosion of new data is turning the insurance business model on its head. There is more data and more access to data than there has ever been and it’s growing. The challenge for insurers is how do you take advantage of all this data to price better, expand your market and improve the business of underwriting risk and handing claims.

In the past insurance companies have relied on “old data”. Information from policy administration solutions, claims management applications and billing systems, often supplemented by 3rd party data such as census data, motor vehicle records (MVRs), medical reports and Dun & Bradstreet to name but a few. However today, insurance companies are incorporating “new data” such as credit scoring, social media such as Facebook and Twitter, telematics from in-car data recording devices and geo-spatial information like Google maps. Unfortunately many insurers are drowning in this vast amount of data and struggling to digest it for meaningful insight.

Data management

To combat the existing silo approach and to alleviate problems with growing amount and diversity of data, insurers are undertaking enterprisewide data management projects. One organization that successfully implemented an enterprise data warehouse is Zenith Insurance. Due to a period of rapid growth the management team were relying on reports and information pulled from numerous departments and disparate systems. Because of the manual process, inconsistency in data, as well as the time and resources required to collate the reports, was proving inefficient. To resolve this problem Zenith rolled out a coherent data-management strat­egy and brought all the company’s data into a SAS Enterprise Data Warehouse. Read more about the Zenith Insurance success story.

The foundation of a successful analytics operation is quality data, and superior data management. There are many examples of where data defects and inaccessibility to data can result in increased operational costs, potential customer dissatisfaction and even missed revenue opportunities. Clearly there is a business case for creating a single, unified environment for integrating, sharing and centrally managing data for business analytics.

To learn more download the white paper “Data is King”

Unleashing the full power of business analytics should be on the short list for every insurer. According to a recent survey 63% of insurers are planning to increase their spending on analytics in the next 12 months.  The path to maximize the investment in business analytics is data. Data management and data quality are no longer optional components of an analytical environment they are essential.

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

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The steps to using analytics…successfully

Advances in technology, evolution of the distribution channels, demographic shift, economic conditions and regulations changes. How does an insurer prioritize all these seemingly competing goals and create sustainable competitive advantage. One answer is analytics.

Many insurance companies are just beginning to take steps toward becoming an “analytic insurer” – one that embeds analytics into daily operations to make better decisions that reduce costs, improve pricing, and more. And those organizations with more advanced analytic capabilities are actively seeking to build on previous successes and grow their analytic capabilities. And no wonder, given the increasing volumes of data being produced through enterprise business systems, online interactions, social media, and other channels.

Analytical Lifecycle

Implementing analytics is not as straight forward as it sounds. There are many steps in the analytical life cycle to consider, but essentially it can be broken down into four main sections:

1. Data preparation

2. Analysis and predictive modeling

3. Deployment

4. Model management

 

In a series of four blog articles over the coming weeks each of these areas will be discussed in more detail.

Turning the increasing volumes of data into useful information is a challenge for most organizations, but following these simple steps insurance companies will be able to implement analytics…successfully.

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

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Data governance - the new prodigal child

The old adage is that “Data is the lifeblood of the insurance industry.” However, for many insurance companies, data is like the red-headed stepchild. No one is willing to take care or have responsibility for it. In the past, insurance companies have created data governance programs, but these have often failed or underperformed due to either:

  • Business executives and managers consider data to be an “IT issue.”
  • The return on investment (ROI) for data governance isn’t clear.
  • Linking governance activities to business value is difficult.
  • Organization structures are fragmented with multiple data silos.

data governance

 

Fortunately, today, things are changing.   C-level executives recognize the need to manage data as a corporate asset. In fact,  you will see a Chief Data Officer (CDO) appearing in boardrooms of many organizations. The primary responsibility  of the CDO is to ensure that data will be managed as a shared asset to maximize business value and reduce risk.

 

 

To help achieve this objective, the CDO will create a team of data stewards who are go-to data experts serving at the point of contact for data definitions, usability, questions and access requests. A good data steward will focus on:

  • Creating clear and unambiguous definitions of data
  • Defining a range of acceptable values, such as data types and length
  • Monitoring data quality and starting root cause investigation when problems arise.
  • Understanding the usage of data in the business units.
  • Reporting metrics and issues to the data governance council.

As insurance companies continue to become more data-driven, their success will ultimately hinge on the ability to maintain and use a coherent view of this data. Better data can drive insight and help insurers make better decisions. To learn more about on this subject download the white paper “SAS Data Governance Framework: A Blueprint for Success.”

Today, data governance is no longer an afterthought. With the emergence of Chief Data Officers, insurance companies are now treating data like the prodigal child.

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

 

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Insurance and the rise of the Chief Risk Officer

The role of insurance is to bring some predictability, manageability and stability to a chaotic and uncertain world.  In essence, it is a risk mitigation tool.

The role of the Chief Risk Officer (CRO) is to manage the overall risk strategy for the insurance company. They are responsible for defining the medium to long-term risk strategy for their insurance organization.

This strategy takes into consideration variables such as risk appetite, target market, customer segments, core products, distribution channels and expected return on investments. This is achieved by what is commonly referred to as the capital management and planning process.

The first step in the process requires insurers to identify and model all material risks that can potentially affect their solvency or the long-term value of equity. To have an efficient capital management framework, insurers also need to coordinate the actions of their risk units with their actuarial and finance departments. Planning and budgeting exercises that steer direction for operational actions should be coordinated with a view into risks, profitability and shareholder returns.

The second step is the necessity to align their decision-making process with estimates for how much capital the organization must have on hand in light of commitments and identified risks. This helps business line managers perceive the constraints and opportunities that economic capital presents in the areas of risk-based pricing, customer profitability analysis, customer segmentation and portfolio optimization.

With an effective capital management, insurers should be able to weather extreme internal risk events (e.g., a large operational risk event) and external scenarios (e.g., a catastrophic natural disaster) at an enterprise level. It also helps business line managers create favorable opportunities, as they can generate an optimized risk-return profile of their product portfolios.

ORSA dashboardA new responsibility for many CROs is the emerging Own Risk Solvency Assessment (ORSA) that is required for Solvency II and other insurance regulations. One of the fundamental requirements of ORSA is that companies conduct an annual, forward-looking assessment. The goal is not only to demonstrate that the company’s current capital needs are appropriate, but also that its future capital needs will be met over a specified assessment time frame (usually three to five years). The report also allows regulators to get an enhanced view of an insurer’s ability to withstand financial stress.

With the recently launched SAS Capital Planning and Management solution, CROs can perform the quantitative aspects of an ORSA, taking into account projected balance sheets, income statements and risk appetite with the capability for iterative scenario analysis and stress testing.

To learn more about emerging insurance regulations,  download the white paper “ORSA: The New Kid in Town”.”

Insurance and risk have always gone together.  However,  as insurance becomes more complex and sophisticated,  the rise of the CRO is inevitable. and the importance is undeniable.

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

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Welcome to “data-driven decisions”

Business analytics is about dramatically improving the way an organization makes decisions, conducts business and successfully competes in the marketplace. At the heart of business analytics is data.  Historically, the philosophy of many insurers has been on collecting data, data and more data. However, even with all this data, many insurance carriers are struggling to achieve better analytics and gain business insight simply because many insurers’ systems typically aren’t designed to master the data in such a way to make it useful for analytical purposes.

data driven

 

The best way to maximize the efficiency and effectiveness of data-driven decision making is to focus on determining the sufficient amount and quality of data necessary for satisfying the execution of a business decision. Of course, this decision-making strategy is easier in theory than it is in practice.

 

Data driven decision management comprises three components:

  1. Data requirements - Different decisions will have different data requirements, which include the data volume, variety and velocity necessary for data-driven decision making. Not every decision requires the same amount and quality of data.
  2. Decision criteria - For example, a decision that must be made within 30 seconds has very different data requirements than a decision that should be made within 30 minutes, or a decision that could be made within 30 days.
  3. Decision evaluation - The quality of a decision is determined by the business results it produces, not the person who made the decision, the quality of the data used to support the decision, or even the decision-making technique.

The big data movement has brought with it a host of new technologies and analytical capabilities. However,  these technologies are ineffective without the right questions and talent to create a data-driven culture.

Imagine…What if you could . . .

. . . predict the buying behavior and decision criteria of your customers and prospects weeks before your competition

. . . gain market share by storing and analyzing the explosion of telematics data for improved risk assessment and distinct competitive advantage

. . . price more accurately based on risk attributes, key demographics, competitors rates, demand elasticity models and make adjustments in real-time

It is possible.

To learn how to turn this theory into reality, download the white paper “Return on Information: The new ROI.”

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

 

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Helping small businesses through the insurance minefield

Insurance can be a complex business, so filing an insurance claim can be daunting task for many small businesses. When an incident does occur, be it property damage, business interruption, professional indemnity or public liability among the myriad of other potential causes of loss, it is typically a period of concern and uncertainty.

Here the hand-holding that brokers offer their clients can make a big difference, offering reassurance and advice. But it is a speedy settlement that is critical to getting a company back on its feet. Such an outcome is particularly important during the current economic environment, with banks continuing reluctance to lend to small and medium-sized enterprises (SMEs). A protracted claims process could prevent a small business from trading, threatening its survival.

The economic downturn has also had an impact on the risk profiles of many SMEs, with companies diversifying their offerings and becoming leaner. Some common examples include extending opening hours, plumbers turning their hand to fitting solar panels, bookshop owners serving hot drinks or newsagents bringing in cash or lottery machines. These changes demonstrate the spirit of SME innovation, however there are liability implications.

By maintaining a close dialogue with its broker channel, insurers can stay on top of these changes, ensure their clients have the right depth and breadth of coverage and therefore when losses occur, there is no cause for dispute or repudiation.

Claims “triage” or decision-tree analysis allows claims departments to determine which cases can be approved speedily while isolating those that require further investigation. Using key data, such as the size of a claim, past history etc enables claims handlers to choose the correct handling process. Such an approach can help avoid backlogs, reducing the claims lifecycle and ensuring a satisfactory and speedy settlement for small business customers.

Data visualization

SAS works closely with its insurance customers to apply analytics across the entire claims process, reducing loss ratios and lowering loss-adjustment expenses through the more strategic and efficient use of data. You can download the white paper Predictive Claims Processing and find out more at www.sas.com/uk/insurance

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Is the customer experience overrated?

According to analyst firms, consulting companies and various other research, customer experience is the primary priority for insurance companies.  But is customer experience overrated?

Let’s start by considering the primary interactions between an insurance company and its customers: new business, billing, renewals and claims. Ask any insurance executive, especially property & casualty, and they will tell you the most important customer experience is the claims process. Yet a recent survey by Accenture found that more than 40% of customers who submit claims are likely to switch insurers within the following year, regardless of satisfaction.

If the claims satisfaction does not positively influence retention rates, we should ask if the customer experience is just hype?

In an article, “Does Improving the Customer Experience Matter?”, Mark Breading from Strategy Meets Action, writes that to answer this question insurance companies must consider three questions:

  1. Who is the customer?
  2. What influences their experience?
  3. Why does it all matter?

It’s the third question I want to focus on. In a blog I wrote earlier this year, I discussed that the primary objective of an Insurance CEO is to grow the business. For most insurance companies, this means increasing market share. To attract new customers and retain existing policyholders, insurance companies need to differentiate themselves from their competitors and the customer experience is vital to achieving this objective.

To learn more download the white paper: “Six Steps to an Unmatched Customer Experience.”

As the great philosopher, Homer Simpson, once said “People can come up with statistics to prove anything”. So while the report from Accenture may be true, insurance companies know that the customer experience does indeed matter.

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

 

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Getting personal at the touch of a button

Over the past decade in insurance, the rise of the aggregators (organisations that compare quotes between different insurers) and direct channels has had a profound impact on personal lines distribution in the UK.

However, personal lines brokers remain a critical route to market, especially at a time when many insurers have been centralising their offerings and closing local branch offices. In terms of distribution, brokers remain responsible for placing 35 per cent of personal lines business, according to Datamonitor.

And increasingly, this business is placed online, via aggregator websites, insurer extranets and comparative quote systems. Personal lines brokers have embraced the full cycle EDI model (electronic data interchange; an electronic communication system that provides standards for exchanging data via any electronic means), yet the ability to maintain a close dialogue with insurer partners remains critically important.

Beyond offering competitive pricing, successful e-broking requires referrals to be handled efficiently while the ability to tap into quote enrichment methodologies also improves the journey. Processes around electronic trading and product delivery are constantly improving, including the ability to cross-check information electronically.

Within motor insurance, the Driver and Vehicle Licensing Authority (DVLA) MyLicence initiative was launched last summer. It allows brokers and insurers to access instant DVLA data on driving entitlements, motoring convictions and penalty points at the point of quote. The industry, through the Association of British Insurers (ABI) and the Motor Insurers’ Bureau (MIB) has worked jointly with the DVLA and Department of Transport to develop the data sharing programme.

360 customer view

Credit scoring and telematics are other examples of how big data can be used to validate application information and reduce fraud. Third-party data can help establish identity, honesty and level of risk at the touch of a button without having to rely on the customer to go through lengthy questionnaires.

By offering intermediaries the means to access better analytics, insurers have an important role to play in improving the profitability of their core broker accounts. And by maintaining a close dialogue, insurers will be in a better position to tailor their products, via schemes and affinities, to meet the changing needs of their brokers’ client base, allowing them to exploit opportunities as they arise.

SAS Visual Analytics works with insurers to offer more precise insights based on all available data. Our insurance software allows clients to take full advantage of big data for telematics, social media analysis, catastrophe modelling and risk analysis. Download our white paper ‘What Does Big Data Really Mean for Insurers?’ and find out more about Insurance Solutions from SAS.

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5 steps to fostering adoption of fraud analytics

Special Investigation Units (SIU) are extremely process-oriented and follow well-documented procedures to decide when a claim should be referred for investigation and what actions should be taken. Most of the staff are seasoned investigators who may be more inclined to trust their experience and tried-and-true processes than analytical techniques that may seem unintelligible.

They can’t trust the data if they don’t understand it - raw analytical model output is often full of technical jargon that’s not easily understood by the business user. This creates frustration for the end user - often an analyst or investigator with more business expertise than technical or statistical experience – and may lead them to think that the analyses are meaningless and analytics lack any real business value. To convince these users to adopt analytics, the solution must give them easily consumable information.

And, you must integrate the analysis with the business process. Fraud analytics solutions need to meet the investigators’ business requirements and be structured in a way that makes sense to them – not just to the data scientists and IT teams. They need a well-configured user interface (UI) that gives them all the information they need to make a decision about whether or not to proceed with an investigation.

Here are five things you can provide to help them see analytics as the answer:

  1. Provide a “one-stop-shopping experience.” The investigator should be able to complete the triage and review process without ever leaving the UI. In a manual fraud detection environment, the investigator has to access multiple internal and external data sources. By providing instant access and a holistic view of these data sources, you exponentially increase investigator efficiency and start to win converts.
  2. Remove the technical jargon. Use scorecards that speak the business language to show the investigator the rules or scenarios that were surfaced by the model and how much weight each contributes to the overall fraud propensity score. This will help them understand why a referral scored high for fraud risk and allow them to focus their investigation on the most critical factors.
  3. Show and tell. Analytical output surfaced in the scorecard should be supported by other data in the UI. Incorporate sections or links to reports that contain the data that support the rules and scenarios triggered in the scorecard. Investigators will not – and should not – blindly accept that the fraud scenarios surfaced in the scorecard are factual. Providing easy access to this data also helps facilitate their investigations.
  4. Leverage third-party data sources. Many SIU’s invest in expensive external data sources and most aren’t integrated with internal data sources. The lack of integration makes it difficult to get the most value from the data. Insurers can get more value from their investment by incorporating it into the UI, combining it with other data elements, and displaying it in a meaningful and user-friendly format. Common examples of this third-party data could include medical bill audit data, industry watch lists, sanction lists, loss history data, estimate data and public records information.
  5. Give them more than just a score. Provide deeper insight into suspicious activity by incorporating data visualization techniques such as link analysis, maps, graphs, charts, annotations, and highlighting of key text and other data elements that support the scorecard findings. These simple approaches resonate with the end user and add tremendous value by directing attention to the most relevant information.

The most powerful analytics in the world have little value if they can’t be readily understood and adopted by business users. Start with these five tips to get your investigators excited about fraud analytics. These will help them see that analytics can drive better decisions and better outcomes.

What do you think the biggest challenge is to the adoption of analytics? Tell us in the comments.

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