NU Online News Service, March 30, 2:32 p.m. EDT
Insurers have a wealth of customer information they could employ for product marketing, but lacking data-mining strategies, they don't use it, a consulting firm advised.
That inability is a failure of management, not technology, experts said at a webinar sponsored by the New York-based consulting firm Deloitte, titled "Prospecting for Gold in the Insurance Data Mine."
Arun Prasad, senior manager with Deloitte, said insurers face four major challenges when implementing data mining.
One is an understanding of who owns the data. The major hurdle here is defining the customer, because there is no standardized way in this industry for owning the customer and defining who the customer is.
He said carriers do not have an effective strategy in place for dealing with their data. This primarily comes from the fact that information is often kept in business silos, he explained.
The silos need to be broken down and the data integrated across the entire business to be effective, Mr. Prasad advised.
He said management must also work for incremental change and not think in terms of "a big bang" solution.
Finally, Mr. Prasad said the issue of data mining is not a technology issue, but a governance issue. Technology experts and management need to work together in order to achieve workable solutions to creating an effective data mining system "regardless of where the data sits," he explained.
Linda Pawczuk, a principal with Deloitte, noted that "there is no question that information is transforming business" and that "with richer information strategy, insurers can understand more about their customers."
However, carriers lag seriously behind other businesses in the ability to aggregate their customer information data base into effective marketing tools, the consultants said.
It will only be when companies eliminate the silos between the business units that they will ultimately unlock the ability to move to enterprise information (consistent, high-quality information, coming from all lines of the business) and unlock true business value, according to Deloitte.
Tami Frankenfield, specialist leader at Deloitte, noted that in order to institute effective data mining, the data doesn't have to be complete, but the company does have to have a good foundation to access that data.
"To do advanced analytics, the data needs to be structured in such a way that it can be queried and analyzed," she said.
John Lucker, principal with Deloitte, said with a good foundation in place, a company can do some useful things. He called it "a real misconception in many ways" if management believes it cannot begin implementing an effective data-mining strategy until data is perfect.
There are "ways that it can be quite imperfect to get meaningful patterns of the data," said Mr. Lucker, adding that actuaries effectively do their job all the time by deriving patterns in the data.
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