It has been said that for an industry beset by disparate, siloed systems, integration is the killer app, and the current service-oriented architecture boom would seem to support the contention. However, there are several less-prominent technologies on the horizon that have the potential to bring significant value in the near term to the insurance industry and potentially drive transformational change in the long term.
Data Visualization Tools
Along with the systems integration progress they have made, insurers are making strides in improving data quality and accessibility. They have begun to appreciate that the vast stores of data they have available to them can yield value, and they are pursuing enterprise data strategies. One way carriers can improve the manner in which they put that data to use is with data visualization tools, according to Donald Light, a Palo Alto-based analyst with Celent.
The technology already is robust, having been developed in industries such as mechanical engineering and law enforcement, Light relates. "What is new is the realization that there's a lot of value to be had by deploying them against the problems of the insurance industry," he says.
One example of data visualization is link analysis, which graphically represents the type and frequency of associations. When adapted to fraud prevention, for example, a link analysis tool could show relationships among parties involved in claims. "What you get - in an intuitive, visual way - are suspicious levels of frequency of attorney and doctor pairing, for example, that might signal a criminally fraudulent enterprise," Light notes.
Insurers also can benefit from use of density maps, which layer multiple strata of data, and show a greater and lesser concurrence of factors through concentrations of red and blue to represent "hot" (high-density) and "cold" (low-density) areas. "An actuary could dive down within the map to see what variables are associated with each other for determining high- or low-risk pricing tiers," Light explains.
What data visualization tools do can be achieved by other means, namely straightforward mathematical analysis. But visual representation increases the speed and power of pattern searching, Light contends. A picture is worth a thousand words, as anyone attempting to explain a complex bar chart over the phone will know. Looking at a visual image, Light argues, "You can pick up in a few seconds what it might take me five minutes to tell you."
Modern data visualization tools, in other words, have all the advantages of their bar- and pie-chart ancestors, but produce images to correspond with different and more complex types of statistical analysis. That capacity means that those types of analyses become more accessible to people with less training. With these tools, Light says, "You can have analysts without graduate-level statistics training."
Geographic Information Systems (GIS)
GIS-related technology has seen wide use in the insurance industry - for example, in connection with catastrophe-related risk management - but not nearly widely enough, according to Jamie Bisker, global insurance industry leader, IBM Institute for Business Value. "When something is as important as GIS, insurers need to think about it holistically," he says. "To do that, they need to make sure that latitude and longitude are included in the base data or record schemas they have in their database."
The theory, according to Bisker, is that "Everything has to be somewhere," and multiple factors associated with that "somewhere" may have bearing on risk and other considerations important to the insurance enterprise. Geographic data visualization tools and other GIS applications can combine a wealth of dimensions - including hydrology, elevation above sea level, climate, weather, seismic/volcanic activity, forest/wildfire risk, landslide incidence, proximity to flood plain, zoning information, population density, disease prevalence, income distribution, local government information and terrorism risk - to support activities such as pricing decisions, risk management calculations, fraud detection, book analysis, field force deployment, and the design of distribution and marketing strategies.
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio