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How Analytics Helped Turn Around Fireman's Fund Profits

The insurer used analytics as part of a plan to recover from a $700 million hole.

Editor's note: This article has been modified from its original published version

It's not very often that an insurance executive admits to their company using three-quarters of a million dollars, but Fireman's Fund chief underwriting officer David Zona did just that at the 2014 Analytics for Insurance USA conference in Chicago March 19.

When the company had such a big loss — $700 million in 2012, Zona said — it knew it had to make big changes to its business processes. That meant a bigger focus on using analytics to help better understand the book of business and improve its performance.

"There's a lot of headlines about the size of analytics departments being built, but we had to go one line at a time, starting with the ones generating the majority of the loss," Zona said.

Fireman's Fund scored its book on its data capabilities and laid out a roadmap for the next three years to adopt analytics across the enterprise. With resources constrained, the strategy was not one-size-fits-all.

[More from the conference: What Chubb Looks For in Analytics Talent]

"When we build our models, we start thinking about how are going to implement it," he explained. "Sometimes we knew we didn't have the tech on the pricing side for a certain line, so we would change our underwriting rules and not our pricing algorithm."

Fireman's Fund delivered an operating profit of $200 million last year in part because of the increased pricing and underwriting discipline brought on by its analytics work. Zona says that other insurers can learn from his company's approach, which was heavily influenced by the financial situation.

"You don't want to tie new core systems or data warehouses to the delivery of an analytics project," he says. "We've built data marts specific to each project. We didn't have time to wait for a new data warehouse or new policy admin system."

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Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio

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