Insurance & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

News & Commentary

11:28 AM
Rachel Alt-Simmons, SAS
Rachel Alt-Simmons, SAS

Analytics: The Business Success You Need to Plan For

Understanding how analytics will help insurers reengineer their business processes: once the analytics have been implemented, what next? How can insurers use analytics to change and optimize their business processes?

I worked with a large insurer last year that is in the process of implementing an enterprise-level strategic analytic application -- if the carrier is successful, these analytics will not only be a game-changer for the organization, but will drive enormous change in how they perform certain business processes. For this organization, the analytics weren't the problem and getting the analytics embedded into the operational systems weren't the problem. The challenge was that the analytics significantly changed the standard operating procedures within their organization. In this instance, this organization found itself unprepared for the managing that change, and as a result, stumbled with getting its internal business community (the people responsible for acting on the analytics) on board.

Think about it: How many organizations truly understand the implications of business intelligence or analytic initiatives on their organization? How many stakeholders cry success prematurely when the project is delivered according to its technical specifications? How do you ensure that your project will deliver the intended business results and achieve high user adoption? Change management: It's essential now, more than ever, as insurers look to analytics to drive organizationally strategic programs, as diverse as increasing fraud detection, better managing exposure and risk, or acquiring and retaining profitable customers and producers.

Here are some of the most frequent reasons companies struggle with business intelligence (BI) and analytic initiatives:

- Too much management, not enough leadership

- Limited support and buy-in at multiple levels within the organization

- No guiding purpose or vision for people to rally around

- Over-emphasis on technology implementation/success criteria

- Business benefits are too fuzzy to articulate and communicate clearly

- No consistent communication or messaging to stakeholders

- Poor identification of stakeholders and influencing factors

- Compensation structures and incentives not aligned to analytic programs

But these obstacles are not insuperable. At the SAS Premier Business Leadership conference last Fall, special investigative unit (SIU) representatives from CNA and Allstate discussed the ways their organizations evolved from teams of "gumshoe detectives" to analytic leaders in their quest to combat fraud.

At Allstate the SIU is looking at the change process holistically: "Over the past couple of years, we've transformed our home office into an innovation environment. We've started to look at data and how it can influence decisions. For us, we always used data in the underwriting process, but we hadn't looked at how we could use data to manage resources [related to the claims process]. We used to hire ex-military and police, but now we're hiring modelers [in our SIU]. What we've been able to do for the enterprise has been phenomenal. We can show the business where our customers' dollars are being attacked and allow them to make better decisions about the business: There is no room for fraud." At CNA, they've improved the accuracy and consistency of their detection process: "Typically, the SIUs have provided training to adjusters on the [fraudulent] "flags" when they're in the field. We hope that adjusters recognize the flags and inform the SIU -- but what we found was that most of the referrals into the SIU came from a tiny group of adjusters; they weren't consistently used. We're making it easier by providing the information that they need to make better decisions and referrals. We've started to implement predictive models and...[we can use those models to] help educate the adjuster in following their instincts. We're finding that our mindset needs to change" from going to a reactive to a proactive model."

In both examples, the teams quickly recognized the change management needed to transform their organizations. Enhanced fraud detection techniques drove changes in how their field investigative units performed their jobs, how they interacted with information, and how their work was prioritized. In many cases, the team that performs the analytic work to support these initiatives is separate from the groups that have to work with output. Without the support of these end users, the initiative will be a failure.

This is a similar problem faced by marketing analytic groups. In my past life at a large diversified financial insurer, when we implemented a predictive segmentation model to target specific producers at risk of attrition, we put the entire business unit through a training and education process. The first training session included the sales desk and the internal sales team. The presenters defined predictive modeling, identified the data used in the modeling process, and explained the outcome of the model: the probability or score a producer would receive based on the segmentation criteria. The explanation and education at this level were extremely important because some of the predictive scores were out of line with the organization's "gut feel," leading the sales team to doubt the model's validity. With the process well understood, the organization more readily adopted the campaign. Since we needed the field sales organization to execute the campaign, this buy-in was essential.

Poorly implemented analytics pose a danger: Business users with a poor understanding of analytics can undermine the initiative by deviating from best practices. The reluctance to hold out a control group, for example, eliminates the ability to monitor a campaign. Organizations that recognize and address these challenges up front and work to educate business users will be successful. Over the years, I have leaned on the guiding principles (with great success) as posed by John Kotter in his classic book "Leading Change."

- Establish a sense of urgency. For the change management initiative to be successful, you must instill a sense of urgency to overcome complacency in the organization. Don't underestimate the challenge of driving people out of their comfort zones.

- Create a guiding coalition. Create a team of champions: Leadership at the executive and front-line levels will be essential to your initiative's success. Your coalition must be empowered to make key decisions and be your advocates throughout the organization.

- Develop a vision, purpose and strategy statement. Create a purpose statement that clearly articulates the vision for the initiative. The purpose statement should be customer-focused and easily understood at all levels of the organization. The statement will direct, align and inspire action. All project activities must be aligned to it.

- Communicate the change vision. Identify and interview key stakeholders at all levels of the organization impacted by your initiative. Develop communication plans to keep your stakeholders appraised. Understand the influence levels of the stakeholders and the need to address individual concerns.

- Empower broad-based action. Barriers can often disempower employees to participate in change. Through the communication process, encourage open feedback at all levels of the organization, identify barriers and remove where possible.

- Generate short-term wins. Often, in project planning, we focus on the technology implementation success of the initiative. At the start of the project, identify critical business success factors and monitor them continuously. Identify short-term goals, track, communicate and celebrate!

- Consolidate gains and produce more change. Many organizations lose momentum after the first quick wins. Find ways to capture and sustain desired outcomes through organizational reinforcement.

Anchor approaches in the culture. It's critical to find ways to embed new behaviors within the organization's culture. Help employees understand how their behavior and attitude helps improve performance through a rewards system (does not have to be financial).

Go forth and champion change!

About the Author: Rachel Alt-Simmons is senior industry consultant for insurance at Cary, N.C.-based SAS. She has held executive roles at major P&C insurers and was formerly research director for Life and Annuity, within TowerGroup's Insurance practice.

Register for Insurance & Technology Newsletters