Editor's note: Brian S. Cohen ispresident and CEO of Pacific Specialty Insurance Company, based inMenlo Park, Calif.

Sitting down for lunch with one of our top independent agents, Iasked him about his business.  

"Things are great – we're totally paperless now!" he respondedtriumphantly. 

"So what are you doing with all of the data you're collecting?"I asked. 

"Oh, I'm too small to do any of that stuff," heshrugged.  

"You're not," I said. "In fact, it's a powerful way foryou to generate more business. Let me show you how…."

"Data analytics" sounds like rocket science—sophisticated,expensive, intimidating, and beyond the reach of the typicalindependent agency.  It isn't. Data analytics is simplythe analysis of data that allows agencies to make a better decisionthan they could without data at all.

The challenge occurs when there is so much data available thatit becomes difficult to determine what information is relevant andwhat is not. It becomes even harder when the data is not stored ina way that can be easily retrieved, reviewed, andanalyzed.  

Today's technology allows people to analyze huge amounts of datain whatever form.   Sophisticated software canidentify patterns and relationships between millions of pieces ofinformation that provide better insight into a subject. This is commonly referred to as "Big Data" analytics. 

Don't get overwhelmed by these terms or the complexity of thealgorithms used to analyze data. Just remember that the objectiveis to use data so you and your agency can make better decisions. 

Here are the key steps you can follow to improve your agency'sperformance by using data analytics.

Step 1:  Understand what you have

Your agency contains a treasure trove of information about yourexisting clients and potential customers.  

Before you can even begin to run a data analytics program, spendtime understanding the data you already collect. Start by creatinga spreadsheet with all of the data you collect when you onboard anew client—for example, birthdate, home and workaddress.  

Add information you collect as part of the underwriting process.For example, if you write a BOP policy for a client, capture allthe additional data an insurer needs to evaluate the risk – thenumber of employees, store locations, andindustry.  

When this spreadsheet is completed, you will discover the sheervolume of data you already collect about yourclients.    

Step 2:  Understand what you want

Who are my most profitable clients? Are clients more profitableif I write both their commercial and personal lines insurance? Howmany policies per household do I need to maintain a high retentionrate? How can I best target new clients? What type of people are mybest referral sources? What marketing programs generate the bestleads?  

If you think you know the answer to these questions becauseyou've asked them yourself, think again. Most agency owners basetheir answer on their own individual experience. That's no longergood enough. Insurance sales and marketing have been transformedfrom an art to a science.  

While the data you collect is extremely valuable, data-analyticstools also allow you to incorporate outside data into youranalysis. What information would you like to have about an existingclient or a potential customer? What information would you like toknow about a certain area or region?  

Identify your "data gaps"—information you don't have but wouldlike to have about a client or a prospect. This might include theirnet worth, whether they own another home or their businessaffiliations. Consider any information you would like to have abouta specific geographic area or other external information that wouldbe helpful in allowing you to attract and retainclients.  

Capturing all of this additional "outside" data is beyond thecapability of any individual agency. But today there are companiesthat do just that. Find one that offers subscription- ortransaction-based solutions with little or no startup costs that iseasily accessible by using their secure website. Find a platformyou can use any time to plug in or access the data youwant.  

The data relationships that you build willallow you to create a strategic advantage. Stay away fromcookie-cutter solutions that just provide "answers" to dataquestions. They don't allow you to differentiate the results of thedata analysis. 

Step 3:   Put the Data toWork

Does your agency-management system have a data-analytics featureor tool? If it does, subscribe to it. If it doesn't, demand thatthe vendor offer such a tool.  

If your agency-management system doesn't have a data-analyticstool, reach out to the insurance company you write a lot ofbusiness with and ask if you can partner with it on adata-analytics project. Offer to share your information if theywill analyze your book of business.  Make sure you play akey role in defining the data to be analyzed and most importantlymake sure you define the hypothesis or data relationship you arelooking to uncover.  

Take Action

Today customer acquisition and retention takes place in realtime, or close to it. The more information you have about currentand potential customers, the better you will be able to addresstheir needs when and where they want it. That's why you need toembrace data analytics—it gives you the information you need—whenyou need it.

If you are like most agencies, you've already done the hard partby getting rid of your paper files and moving to an electronicagency-management-system platform. 

Now you need to start using your data. You have a greatopportunity to become a sophisticated marketer and drive betterperformance and growth out of your agency.  

What are you waiting for?