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11:43 AM
Stephen Applebaum, Insurance Claim Solutions
Stephen Applebaum, Insurance Claim Solutions

6 Key Insurance Business Impacts from Analytics

Analytics are igniting innovation and disruption across the insurance industry, as a conference last week showed.

Last week I had the privilege of serving as chairman of the inaugural Insurance for Analytics USA conference in Chicago which was very well organized by Data Driven Business, part of FC Business Intelligence Inc. I am convinced that analytics is not only one of the most valuable and promising technology disciplines to ever find its way into the insurance industry ecosystem, but that it's very adoption and use clearly identifies those carriers – and their information technology partners – who are and will continue to be the most innovative in their markets.

As an insurance information technology industry veteran, I have participated in well over 100 industry conferences in my career — but there were several distinctly unique aspects about this event that have lead me to the conclusion that analytics is something entirely unique in terms of its broad enterprise potential, it's ability to permanently change and disrupt the way in which carriers think, act and conduct their business, and that it's future is even more promising than most can today imagine. And, unlike other industry conferences, the excitement and enthusiasm among participants was palpable.

Stephen Applebaum
Stephen Applebaum

Applying analytics: Cross-industry, cross-enterprise and cross-lines of business

Apparent at this conference was the sheer diversity of carrier types and sizes as well as the many different operational areas in which analytics is being used to drive insight, business outcomes and innovation and create real competitive differentiation.

From large carriers as diverse as Chubb, Sun Life, Nationwide, American Family, CNA and CSAA, to smaller and equally diverse insurers including Fireman's Fund, Pacific Specialty, Great American, Westfield, National General and Houston Casualty, we were intrigued by presentations about the many different applications of analytics by leaders from a wide variety of enterprise departments and functions including CEOs, CIOs, department heads and managers of underwriting, product development, actuarial, research, innovation, statistical reporting, claims, strategic research and economics modeling and web analytics. In addition, conference sponsors and presenters included a wide variety of information technology provider types including Dun & Bradstreet, L&T InfoTech, Fractal Analytics, Megaputer, EagleEye Analytics, Clarity Solutions Group, Dataguise, Quadrant, Actionable Analytics, Earley & Associates and DataDNA. And rounding out the program were analytics related perspectives from Insurance & Technology, NAIC and PCIAA.

Predictive Modeling: Use and non-use is telling

Recent research shows that one major application of analytics — predictive modeling — is getting attention in pricing and rating, where more than 80% of carriers use it regularly. However, only about 50% use it today in underwriting, and less than 30% do so in reserving, claims and marketing. However, the most innovative companies are leveraging it in all of these areas, as evidenced by the presentations.

In closing, based on information shared during the conference and the many productive and informative networking opportunities, it became evident that there are six major thrusts to the analytics trend:

• analytics liberates and democratizes data, which in turn ignites innovation and change management within carrier organizations

• analytics is uniting insurance organizations, breaking down information silos and creating collaboration between operating units, even as enterprise data governance policies and practices emerge

• investment and M&A activity in information technology companies in data and analytics is surging, and will create even greater disruption and innovation as more entrepreneurial thinkers continue blending art with science

• new "as-a-service" pay-per-use models for delivery and pricing are emerging for software (SaaS) and data (DaaS) which will be especially appealing and cost-effective, especially for mid-tier and smaller carriers

• analytics are – and will continue to – drive innovation in products, business processes, markets, competition and business models

• carriers will have to Innovate or surrender market share and should be watchful for players like Google and Amazon who understand data, cloud, innovation and consumer engagement.

About the author: Stephen Applebaum is principal for Insurance Claims Solutions. He is a subject matter expert and thought leader providing consulting, advisory and strategic M&A services to participants in the North American P&C insurance ecosystem covering insurance IT, claims, innovation, supply chain and vendor management. Applebaum was most recently Senior Analyst, Property & Casualty Insurance at Aite Group. He has also been president of ClaimForce, a web-based insurance claims technology, supply chain management, and outsourced services company, and worked at ADP Claims Services and CCC Information Services. Applebaum is a frequent speaker and panelist at industry conferences and contributor to major insurance industry publications and has a strong passion for coaching, mentoring, business process innovation, applying disruptive technology, and managing organizational change in the property & casualty insurance industry and trading partner community.

[To hear about how insurance companies and financial firms are managing their complex data architectures, attend the Future of the Financial Services Data Center panel at Interop 2014 in Las Vegas, March 31-April 4.

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