Data Discoveries and Analytics Unite to Ignite Innovative Thinking in Financial Services

Much has been written about "Moneyball", analytics and how this data-driven methodology changed the way talent is assessed in baseball. So you can understand the excitement that Billy Beane, General Manager of the Oakland A's, and the subject of "Moneyball," sparked at the recent SAS Financial Services Executive Summit.

The audience was expecting a series of baseball anecdotes, and instead we were treated to a series of stories and examples about how Beane used statistics to evaluate players -- which for a room full of analytical executives was like taking kids to a candy store.

Billy Beane was introduced to the power of analytics at an earlier age since one of his relations was an actuary. His team of statisticians, led by Paul DePodesta, did not use big data or even new data. They simply looked at the statistical data for pitchers and batters differently. No longer were the batting average and earned run average the only criteria for player performance. The analysts discovered new metrics to determine the efficiency of baseball players, such as base runs, on-base plus slugging percentage and fielding independent pitching.

There is much an insurance company can learn from this strategy. How can insurers experience and analyze existing internal data from claims, policy, billing and agency systems to find their "Moneyball" moment? Are there nuggets of information in the data that will help with better pricing, assessing agent performance or determining customer loyalty? My favorite Billy Beane quote was, "Trust the mathematics, and the wins will come."

After Beane's keynote speech, a lively panel of distinguished financial services executives shared their insights into "How well do you know today’s customers?" According to Joseph Grillo, Vice President, Direct Marketing, Global Accident and Health, ACE Group, little has changed in the last decade from a business perspective. It's still about getting the right products to the right customer at the right time. However what has changed is how you use data to gain insight and competitive advantage. "Today everyone has analytics; implementation is the differentiator."

Harvey Koeppel, former Chief Information Officer and Senior Vice President, Global Consumer Group, Citigroup, spoke about the shift in the balance of power from institutions to the customer. He explained that in the past, customer service was based on the adage, "The customer is always right." In the mobile and socially connected customer service of today, the customer is in charge.

It appears that no conference these days is complete without a session on big data, and this event was no exception with representatives from insurance, banking and the United Nations providing a fascinating discussion. Aditya Bhasin, Consumer Marketing and Online/Marketing Banking Executive at Bank of America, said, "Today, big data is a way of life, we have more than 65 petabytes of customer data." He went further to say that Bank of America analyzes only about 1 percent of that data.

Although this appears to be a small fraction of the bank's data, Bhasin said that the data they use today is very different from that of just three years ago. Today, using internal financial transaction data, Bank of America knows where their customers shop (rather than relying on independent third-party data), which enables the bank to improve marketing performance.

Charles Thomas, Research and Analytics Executive at USAA, spoke about how USAA was making a cultural change to be a more data-driven organization while still providing its members with exceptional service. To enable this change, he said USAA had created an analytical center of excellence with a centralized data warehouse, the latest tools and technology, and a team of skilled analysts. But, he emphasized -- following the baseball theme -- "you still need someone to catch the ball where it is hit," or to paraphrase, without adding business benefit, best-in-class analytics offers limited value.

Robert Kirkpatrick, Director of Global Pulse, an initiative of the United Nations Secretary General, gave some intriguing insights into how they are using big data, such as being able to understand sentiment in Twitter feeds and recognize increases in unemployment rates or population changes months before official data. It will be interesting to see how this initiative transpires over time and how financial services organizations can use the data.

"Ignite" was the theme for this event and I felt it lit the flames for some innovative thinking and collaboration in the financial services industry. I cannot wait for next year's event.

Stuart Rose is Global Insurance Marketing Manager at SAS.