The concept of “big data” and ways to leverage it has not been lost on the insurance industry. Although other sectors may be ahead, the risk and insurance industry actually was an early adopter of data, in particular its foundation based on the ‘”law of large numbers” and utilization of actuarial science.
Indeed, where would underwriters be today without their arguable mastery of big data?
Consider the volumes of loss, construction, fire protection and historical weather data that are routinely analyzed by property underwriters; workplace claim and injury data accumulated and scrutinized by workers’ compensation carriers; aggregated exposures tracked and analyzed by reinsurers with respect to catastrophic events; the development of mortality and morbidity tables used by the life/health companies, as just a few examples. And you get the picture of an industry that in many ways has been at the forefront in its ability to capture, manipulate and utilize vast amounts of data—big data—for a variety of its critical applications.
However, the insurance industry may still be in its infancy with respect to its ability to gather and utilize all the vitally relevant data out there. Consider the incredible amounts of data the industry accumulates through the hundreds of thousands of daily transactions, but doesn’t necessarily capture centrally and utilize.
This is a critical aspect of big data that the insurance industry generally has been missing—and where the industry as a whole now trails other sectors. Success in accumulating and analyzing data holds the keys to greater efficiency, accelerated product development, targeted marketing and improved client service.
Meanwhile, on the client side—the ultimate consumers of insurance and risk management services—expectations are rising. Most industries are finding ways to capture and use information about their company performance (including sales, marketing, distribution and operations), and are developing a sharper focus on analytical tools to drive performance improvements across their organization. Increasingly, clients are coming to expect their advisors (brokers and agents) to “speak their language” and provide similar types of analytic capabilities.
Accordingly, the trends suggest that the insurance industry needs to strengthen its ability to capture, analyze and act on big data that exist throughout its distribution channel. In their daily interactions with clients, agents and brokers accumulate tremendous amounts of data with very few examples of brokers utilizing the data for internal and external benefits.
Meanwhile, the capability now exists for all brokers and agents to capture data, house it centrally, and use it in a variety of ways to improve performance and deliver greater value to clients and prospects. Such applications can bring a wide range of benefits, including:
- Capture and centralize all client placement data
- Benchmark client programs by coverage line, geography, industry, size band
- Pinpoint areas of growth and opportunity
- Evaluate performance and workload of individual colleagues
- Expand access and knowledge of insurer capabilities for clients and prospects
- Enhance the ability to collaborate with insurers on new product roll-outs, coverage enhancements and new business opportunities.
Despite the significant advantages technology and analytics can bring agents and brokers, moving forward can be a challenge. New processes and technology involve an organizational commitment as well as an effective implementation plan. Those in the process of making buying decisions might take advantage of some observations from working with others who’ve already been down this path:
- Decision-making must be top-down. For any business or organization, the acquisition of technology is an investment—not only in terms of out-of-pocket costs, but also with respect to the initial opportunity costs associated with the time involved in implementation. Senior management must be fully on board with the decision and visibly supportive of the process involved in implementation.
- Make sure IT is involved. While the purchase of technology is first and foremost a business decision, you need to have your IT team engaged in both the selection and implementation process.
- Know your people. What’s in it for your people? In many cases, systems are adopted and the value for those working on the business is never fully realized. From the early stages of the selection process, find ways to engage colleagues at all levels of management and client service. This will help ensure adoption and a return on the investment.
- Win over the skeptics. Every organization has employees who are resistant to change. While the top-down approach may have some effect on gaining the confidence of these key colleagues, engaging them in the process has led to greater results. The new technology will potentially make these top colleagues even more effective and ultimately the biggest supporters of adoption.
- Leverage internal resources for tech roll-outs. Bringing in outside vendors to help with the implementation of technology often is a big mistake. Use your IT team, human resources and individuals from each of your units to help with training and to walk your personnel through the capabilities and features of a new system. Outside vendors may not know the nuances of your business, which might delay your firm from reaping all the benefits you envisioned.
While big data is not new to the insurance sector, it still presents significant opportunities for the industry to achieve meaningful gains throughout its distribution channel. With an eye on the future, agents and brokers can seize opportunities available through technology and analytics to drive growth and elevate performance.