Back to the Future…

Let’s go back in time to the summer of 2007. The original iPhone had just been launched. Miley Cyrus was Hannah Montana. The San Antonio Spurs were NBA Champions, and LeBron James was the savior of Cleveland Cavaliers. Insurance Executives were only concerned about legacy replacement systems.

On the surface, the business outlook appeared positive. In reality, we were just weeks away from the collapse of Lehman Brothers and the financial crisis that came afterwards.

The summer of 2007 was also when Freedom Specialty decided to enter the Director and Officers Liability Insurance (D&O) market. Despite the impending financial crisis, Freedom Specialty committed to a multi-million dollar investments in an analytical underwriting system.  Now fast forward seven years, Freedom Specialty has grown its D&O business to over $300m in annual direct written premium while maintaining a loss ratio that outperforms the industry.

The key areas that resulted in this success are:

  • Data Sources – The underwriting accesses six distinct external sources and receives data from internal administration applications.
  • Data scrubbing – Significant emphasis was placed on veracity of the data. Multiple data quality processes were implemented to improve its usefulness.
  • Predictive model – Data is combined and fed into a model that uses multivariate analysis to determine pricing.
  • Risk selection analysis – A one-page analysis of recommendations is produced for the underwriter.
  • Integration with corporate systems – Once an underwriting decision is determined, statistical information is transmitted back to the administration and analytical underwriting systems.

To read more about the Freedom Specialty story, download the case study here.

As Freedom Specialty continues to innovate and prosper, the world has seen a lot of change during the past seven years. The iPhone, the iPad, and other mobile technology have transformed the business environment. Miley Cyrus is definitely NOT Hannah Montana , and today, Insurance Executives’ conversations revolve around Big Data, Hadoop and Analytics.

Of course in a sea of change, some things remain constant:  San Antonio Spurs are NBA Champions and LeBron James is once again the future of Cleveland Cavaliers.

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

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Size Is Not The Problem

Lately, much has been written about Big Data and the exponential growth of data generated for insurance companies.  However, for most insurers size is not the problem when it comes to data. In a recent study by analyst firm, Strategy Meets Action, Big Data in Insurance found that insurers are more concerned about the variety, veracity and velocity than the volume of data being created in today’s digital environment.

  •  Variety – From PDF and Word documents to email to video to geospatial imagery to social media  and even prescription data, the variety of information being used by insurers today is significantly different than what it was 5 years ago. The variety may represent the biggest challenge for insurers but it is potentially the biggest game changer for the industry.
  • Veracity – It does not matter how many terabytes of data is stored in your data warehouse.  If the data is unreliable,  its’ useless. Hence, data quality and maintaining the accuracy of the data is essential.
  • Velocity – Telematics, social media, and other data is streaming into insurance companies in real-time. At the same time, insurance executive expect insights into the data almost simultaneously.
  • Volume – Whether its gigabytes, terabytes or petabytes of data, nearly all insurance companies are now finding it too costly to store all this new data. To overcome this problem insurers are taking advantage of commodity hardware like Hadoop. This was confirmed by the research that found over 50% of insurers are using or considering using Hadoop.

Big Data is no longer a fad.  Its usage has gone beyond the experimental stage. In fact, the research found that investment in Big Data initiatives by ALL insurance companies has dramatically increased in the past 12 months. Most notable, tier one insurers with revenue over $1bn, where investment has grown from 14% in 2013 to nearly 40% this year.

Despite all this investment, if insurers are going to achieve the strategic transformation and innovative potential of big data, they must start by determining how big data can add Value (AKA the 5th V) to their business. Ultimately, insurers should stop thinking of Big Data as a challenge and start seeing Big Data as an opportunity.

To learn more about “Big Data in Insurance” either download the White Paper or register for a webinar on August 28th at 11am EST.

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 Is a Digital Insurer?

Over the past 12 months, there has been much discussion regarding the “Digital Insurer.”   The first question is:  What is a Digital Insurer?  In a recent webinar, UK insurance executives joined SAS and Marketforce for a lively debate on this subject.  Much of the discussion focused on how mobile technology is changing the customer engagement to create the digital insurer.

Paul Baxter, Head of Chaucer Direct, a small car (auto) insurance company, spoke about how his company was able to leverage the insurance aggregator websites to compete with  larger insurers. It is estimated that nearly 60% of the UK car insurance policies are sold via a price comparison website. However, for many insurance companies, the point of failure comes when the customer is transferred from the aggregator website to the insurer website which in many cases is not optimized for mobile technology.

Daniel Mines, International Business Development Manager at Admiral Insurance Group highlighted how customer engagement via the right channel is essential. Today’s millennial generation no longer use email because communication has to be faster, almost instantaneous. While Baby Boomers and Generation X are willing to perform simple transactions such as changing their address via the Internet,  they still prefer personal interaction via face-to-face meetings when it comes to buying insurance.

Mike Blanchard, SAS’ Head of Industry Marketing spoke about how many customers view insurance as an indirect tax, with little intangible benefit.  Insurance companies need to collaborate with third party partners to obtain and share data in order to provide value added services. The use of more data will enable greater predictability, which  for an industry built on uncertainty,  is essential.

If you are interested in hearing more from Chaucer Direct, Admiral Insurance and SAS on the Digital Insurer you can view the webinar at this link.

If insurance companies limit their digital investment into mobile technology and marketing, they are missing the bigger picture.  Today so much of the content, both structured and unstructured, is created in digitized form. The real “Digital Insurer” is the one that analyzes all this digital data using Analytics not only for marketing, but also to increase pricing accuracy, reduce fraud and improve operational inefficiencies.

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

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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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