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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Should I Call? – Using Analytics to Optimize Premium Audit

For most insurance companies the business planning process for the coming year is now  complete.   A number of leading industry experts cite that one of the main priorities for insurance companies in 2014 is to improve profitability and to increase efficiency. One area where insurance companies can improve efficiency is associated with premium audits for Workers Compensation policies.

The white paper “Plugging Premium Leakage” discusses the increasing trend in underwriting fraud, especially rate evasion in policies.  A common form of rate evasion is underreporting payrolls and misclassifying business operations for Workers’ Compensation insurance.

To help ensure the accuracy of premiums for Workers Compensation coverage, insurance companies have created premium audit teams. These auditors must identify and reconcile discrepancies in premiums resulting from differences between reported and earned exposures. These discrepancies will result in either additional premium paid to the insurer or returned premium to the policyholder. To find these differences the auditors will use one of three types of audit – Physical, Telephone or Voluntary (mail / online survey).

The objective for the auditors is to determine the most efficient premium audit type to maximize the additional premiums and to minimize the returned premiums, while balancing work loads and costs. The result is a complex selection criteria to prioritize audits.  Instead of a simple FIFO (first-in, first-out) methodology, insurance companies are beginning to use analytics to make premium audit decisions. By using a combination of business rules based on account size, location, premium amount as well as data mining to identify complex patterns in the data, insurers can optimize their premium audit strategy.

Analytics is about dramatically improving the way an organization makes decisions, conducts business, and successfully competes in the marketplace. Using analytics for premium audit is a great example of how insurers can improve profitability as well as increase efficiency by generating more premium revenue faster, improving cash flow, and reducing fraud.

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

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Just How (Analytically) Mature Are You?

It’s no secret that using analytics to uncover meaningful insights from data is crucial for making fact-based decisions. Yet when it comes to making analytics work, not all organizations are equal. In fact, despite the transformation power of big data and analytics, many insurance companies still struggle to get value from their information.

To help organizations understand their analytical strengths (and weaknesses), SAS has teamed with CIO and Computerworld publications to create an online assessment questionnaire. This survey, comprising of 16 questions, enables insurance companies to see how they compare with their peers and identify areas that need improvement.

Use this link to find out your analytical maturity.

The evaluation covers the proficiency of your organization across 8 metrics:

  • Productivity – the efficiency of processes supporting the analytics lifecycle across IT and business departments
  • Governance – the overall rigor placed around data and model stewardship
  • Timeliness – more than just speed, it measures how organizations handle data to derive meaningful insights from it and put analytical models into production
  • ROI – value generated from analytics as compared to the cost of providing that value
  • Accuracy – pertains to the accuracy of data in the analytics life cycle and the impact it has on effective decision making
  • Effectiveness – organization’s ability to overcome challenges and generate value across people, processes, technology, data and culture.
  • Empowerment – level of self-sufficiency for employees supporting the analytics life cycle across IT and business functions.
  • Maturity – measures the organization’s analytical competency, consistency and alignment across people, processes, technology, data and culture.

Irrespective of your analytical maturity, analyzing data is essential to the success of an insurance company. From ratemaking and fraud detection to predicting future customer behavior using analytics contributes to the success of insurance companies.  To learn more about how SAS can help, visit our new insurance webpages or download the white paper “Building a strategic analytical culture”.

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

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Disruption or innovation - Future of insurance

My last blog looked back on 2013, so for this article I thought it appropriate to look forward and consider the future of insurance. Interestingly an industry that is built on uncertainty, predicting the future of insurance could be considered somewhat predictable. Priorities for insurance companies have not changed dramatically over the years. Apart from additional coverages and rider benefits, products have remained the same and despite the growth in the direct channel, nearly 90 percent of policies are still sold by an intermediary.

However the insurance industry is going through a period of transformation, some changes will impact the industry in the immediate future, i.e. Solvency II, others the impact could be years even decades down the line.

There is no doubt that technology will be a major disruptive force for insurers in the future, but social and economic factors will also have a substantial influence.

Experts talk of telematics as a game changer for the industry, but what is the future for auto insurance with driverless cars and crash-avoidance technology?

Another instance of how advances in technology is changing insurance is the usage of radio-frequency identification devices (RFID). These devices have aided companies across a wide variety of industries for many years. Now insurance companies are using RFID technology to help with risk mitigation by monitoring buildings and other structures or tracking and identifying livestock.

Smart Phones have changed the game over the past years, now everything is mobile with consumers making decisions on the go, instantaneously. Innovative insurers may use GPS information from these smart phones to push out offers to customers based on their location. For example travel insurance if the customer is at an airport.

From life insurance perspective technology could have a more significant impact. Biotechnologies have the potential to dramatically improve insured health through enhanced monitoring and preventive control of chronic disease. The question are these advances in biotechnology helping or hindering the life insurance industry?

Society and the economy are always changing. Insurance are facing an aging population in the mature markets, but great potential with the rising middle class within the emerging markets (China, India, Brazil and Russia).

The future of insurance may be impossible to predict, and while there are new challenges and opportunities on the horizon for insurers, I am betting that in 10 years insurance executive will still be concerned about premium revenue, loss ratios, customer retention and increasing regulations.

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

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2013 – The year of Big Data and Statistics

Keeping with tradition, my final blog of the year is a time to reflect on the previous 12 months. In my opinion, two major themes come to mind: Big data and the “International Year of Statistics”.

A somewhat overused and abused term, there is no doubt that 2013 was the year of Big Data. Publications, television, conferences…it appeared that you could not go 30 minutes without reading or someone mentioning Big Data, and SAS was no exception.

In October SAS announced a partnership with SAP-HANA to help organization harness the power of big data with in-memory data analysis capabilities. From an insurance perspective, UK insurer Ingenie, revealed how they were using SAS Analytics to analyze their telematics data. While German insurer metafinanz and Greek insurer Generali Hellas are both using SAS Visual Analytics to quickly analyze billions of rows of data.

2013 also represented the “International Year of Statistics”, so to celebrate, try your hand at this short quiz.

Listed are descriptions for five famous individuals who began their careers as statisticians. See if you can guess who they are. The answers are listed below.

a)      A British Prime Minister who won 4 General Elections

b)      The “lady with the lamp” is recognized as the founder of modern nursing.

c)       One half of the most notable stock market index

d)      Recently joined ESPN and in 2009 was named one of the “The World’s 100 Most Influential People” by Time magazine

e)      Worked on the Apollo program before becoming CEO of a company regularly voted as “Best Places to Work”

Finally, I would like to wish all my readers a Happy New Year and I am looking forward to spreading the word about analytical innovation in insurance in 2014.

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

Answers: a) Sir Harold Wilson, b) Florence Nightingale, c) Edward Jones, d) Nate Silver, e) Jim Goodnight

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Analytically Speaking: What’s your culture?

There is no question analytics is a hot topic. It seems like everyone is talking about it.  But analytics is not new to the insurance industry. It has been around for many years; in fact it could be argued that the first mortality tables were a form of analytics as the actuaries were using historical data to forecast the survival rates of their policyholders and insured. However compared to many other industries, insurance companies are seen as laggards when it comes to analytics. Why is this?

One reason is that until now, analytics has predominately been seen as a back-office function, used by silo departments, such as claims, actuarial and marketing. To become analytically efficient, insurance companies need to create a strategic culture where data and analytics is part of the corporate DNA.

A strategic analytic culture starts and ends with executive management commitment, as illustrated in the diagram.  When executives are fully bought into the concept of an analytic culture, they set goals, priorities and expectations based on the use of analytics. They invest in technology, people and processes that will continue to foster this culture. Most importantly, they become highly sought after, both internally and externally, as their companies continue to outpace the competition.

 

The journey to a strategic analytic culture starts with a small step. The key to success is to have a small, well-defined victory and then sell it loudly across your organization. Great examples of analytical insurance companies are AIG, AEGON and CNA.

In insurance companies, many decisions hinge on finding the right balance between what's best for the customer and what's best for the organization. Data and analytics can shore up the relationship between customer experience and profits, ensuring that decisions remain in balance. An enterprise-wide commitment to data and analytics is the key to achieving this balance. To find out more download a copy of the white paper “Building a strategic analytics culture: a guide for the insurance industry”.

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

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When a handshake is worth 1000 words

Earlier this year I wrote an article about how the spring season is a busy time for insurance conferences. Often October is just as busy and this year was no exception. In the last few weeks I have been fortunate to attend two excellent conferences. The first event was the Insurance Networking News Analytics Symposium .  It was refreshing to attend a conference focused entirely on analytics for insurance companies, and it contained excellent presentations by AIG, XL Group and Chubb to name but a few. The Symposium concluded with a great session by James Taylor, CEO of Decision Management, who spoke about how insurers are implementing Decision Management processes into their operational systems to make real-time analytical business decisions.

The second event was the Premier Business Leadership Series. This is one of my favorite events of the year since it brings together executive leaders from across the globe to discuss how they are using data and analytics within their industry. Two sessions stood out at this year’s event.  First of all, Walter Isaacson, spoke about the books he had written on notable figures, in particular Steve Jobs, and the leadership qualities that made him an icon in today’s society. The second session was by Jason Dorsey. In a highly entertaining presentation, he discussed how to increase communication and connect with the fastest growing segment in today’s workforce, the Gen Yers.

The question then arises that with advances in technology (i.e. iPhone, iPad etc.), and the way that today’s Generation Y communicate (texting, social media), what is the future for in-person conferences?

Live events that are seen as boondoggles cannot survive in the current economic environment. Today, event organizers recognize the need to include engaging content and education value through keynote speakers and great presentations. But still the question remains why attend in person when you can follow the conference via social media (#PBLS13 or #IAS13) and live video links?

Clearly we are in the midst of a technology revolution that is changing the way we communicate, and potentially transforming the conference business. However there continues and will continue to be huge value in face-to-face networking. The value of looking someone in the face and shaking their hand is priceless.

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

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