Your Data Is Vital to You, But Do You Know How Much It’s Really Worth?

By: | October 30, 2018 • 3 min read
Dr. Henna Karna is a data scientist and Chief Data Officer of Bermuda-based multinational insurer AXL XL, a division of AXA, which recently unveiled DEEP, the industry’s first Digital Ecosystem & Engagement Platform. Karna can be reached at riskletters@lrp.com.

As companies across all sectors evolve into digital enterprises, there is an increasing need to value a company’s data as a tangible asset on the balance sheet. While data appears to meet the formal criteria of a business asset, current Financial Accounting Standards Board (FASB) accounting practices prohibit organizations from capitalizing it.

This may need to change.

For businesses that are information-rich, like financial services, data is the feedstock for pricing products, making it the primary asset of value. For other companies, data can become a separate revenue stream offered as a new product line or separate income stream. Insurers, for example, could provide benchmarking information on workers’ compensation claim trends across different occupations in disparate geographies to customers or third-party companies for a fee or as a free service.

Insurance has always been a data-focused business, albeit a historical one. By integrating historical information with more real-time sources of data and leveraging predictive data analytics, machine learning and other cognitive computing technologies, insurer capabilities will expand. By capturing and analyzing a vast array of structured and unstructured data, carriers can create new commercial insurance products and unique insurance coverages customized to a client’s specific demands.

Insurance has always been a numbers game; now the numbers have more meaning than ever before.

Once data is digitized, a computer can capture, search, exchange and integrate different data elements. Digitalization — a company’s use of this digitized information to optimize its business and operating workflows — then follows. The next step is digital transformation, which calls for integrating the organization’s digital footprint with partnering businesses and customers in a collaborative and transactional digital ecosystem.

As companies move forward in this three-step journey, they will capture and access both historical and real-time structured and unstructured data for analytical purposes. The bonus is that the semantic layers of this data are being mapped at a faster rate to offer even deeper insights. Semantic data is crucial to making tomorrow’s business decisions as it represents data in common business terms. Users can access the data they need by using familiar business words like “product,” “customer” or “revenue” to obtain a unified, consolidated view of data across the enterprise.

Our own digital transformation is focused on Dense Data — basically Big Data in which different pieces of information on a particular subject are distilled to provide greater business context.

Using Dense Data, we will be able to continuously enhance the customer value of our products, dramatically increasing their value and lifespan. Like all products, insurance policies are not evergreen. If they’re not continually improved, they’ll die out like a five-year-old smartphone.

Asset Valuation

These examples of the exponential growth increasing and business value of data all point to a future where data is valued on the balance sheet as an asset. The challenge, of course, is how to determine the value of different types of structured and unstructured data. Without this capability, boards of directors, analysts and investors cannot easily and dependably compare the accurate value of one company’s data to another’s.

Accurately valuing data is an uphill climb, but it’s not impossible: Dealmakers in the M&A environment are constantly putting a value on information assets, particularly when the target acquisition is a data-rich business — like when Microsoft acquired LinkedIn. Companies can begin to assess the business value of their data by leveraging the insights of their data scientists and engineers about these information assets, where these reside and how they produce business benefits.

In our company, the enterprise data team is entrusted in partnership with the heads of finance and operations to begin the process of valuing our data.

Each time a data element is used in one part of the organization (say claims) to produce a particular insight, and the same element is subsequently reused by another part of the business (like underwriting), this reuse capability not only brings down the marginal cost of data, but it also creates a metric for monetary return. How often this particular data element is reused can be a means of calculating its value as an asset. As time goes by and the data element is reused less and less, its value would correspondingly decrease.

That’s just one idea and there are likely others. The point is that digital transformation is a nonstop locomotive, in which many businesses are still just beginning. For those of us in the insurance industry, this journey is well underway and it is both scary and exciting.

Insurance has always been a numbers game; now the numbers have more meaning than ever before.

2018 Risk All Stars

Stop Mitigating Risk. Start Conquering It Like These 2018 Risk All Stars

The concept of risk mastery and ownership, as displayed by the 2018 Risk All Stars, includes not simply seeking to control outcomes but taking full responsibility for them.
By: | September 14, 2018 • 3 min read

People talk a lot about how risk managers can get a seat at the table. The discussion implies that the risk manager is an outsider, striving to get the ear or the attention of an insider, the CEO or CFO.

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But there are risk managers who go about things in a different way. And the 2018 Risk All Stars are prime examples of that.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Goodyear’s Craig Melnick had only been with the global tire maker a few months when Hurricane Harvey dumped a record amount of rainfall on Houston.

Brilliant communication between Melnick and his new teammates gave him timely and valuable updates on the condition of manufacturing locations. Melnick remained in Akron, mastering the situation by moving inventory out of the storm’s path and making sure remediation crews were lined up ahead of time to give Goodyear its best leg up once the storm passed and the flood waters receded.

Goodyear’s resiliency in the face of the storm gave it credibility when it went to the insurance markets later that year for renewals. And here is where we hear a key phrase, produced by Kevin Garvey, one of Goodyear’s brokers at Aon.

“The markets always appreciate a risk manager who demonstrates ownership,” Garvey said, in what may be something of an understatement.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Dianne Howard, a 2018 Risk All Star and the director of benefits and risk management for the Palm Beach County School District, achieved ownership of $50 million in property storm exposures for the district.

With FEMA saying it wouldn’t pay again for district storm losses it had already paid for, Howard went to the London markets and was successful in getting coverage. She also hammered out a deal in London that would partially reimburse the district if it suffered a mass shooting and needed to demolish a building, like what happened at Sandy Hook in Connecticut.

2018 Risk All Star Jim Cunningham was well-versed enough to know what traditional risk management theories would say when hospitality workers were suffering too many kitchen cuts. “Put a cut-prevention plan in place,” is the traditional wisdom.

But Cunningham, the vice president of risk management for the gaming company Pinnacle Entertainment, wasn’t satisfied with what looked to him like a Band-Aid approach.

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Instead, he used predictive analytics, depending on his own team to assemble company-specific data, to determine which safety measures should be used company wide. The result? Claims frequency at the company dropped 60 percent in the first year of his program.

Alumine Bellone, a 2018 Risk All Star and the vice president of risk management for Ardent Health Services, faced an overwhelming task: Create a uniform risk management program when her hospital group grew from 14 hospitals in three states to 31 hospitals in seven.

Bellone owned the situation by visiting each facility right before the acquisition and again right after, to make sure each caregiving population was ready to integrate into a standardized risk management system.

After consolidating insurance policies, Bellone achieved $893,000 in synergies.

In each of these cases, and in more on the following pages, we see examples of risk managers who weren’t just knocking on the door; they were owning the room. &

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Risk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, clarity of vision and passion.

See the complete list of 2018 Risk All Stars.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at dreynolds@lrp.com.