Analytics

Leveraging a Big Data Approach

Insurers need an enterprisewide data and analytics approach to products and customer service that includes social media.
By: | August 14, 2014 • 4 min read

Insurance companies will be able to capitalize new market opportunities and avoid costly exposures when they can better analyze and act on lessons from Big Data.

That’s one of the main findings from two recent industry reports highlighting the need for enterprisewide management of big data, including unstructured data from social media and mobile devices.

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Very few insurers have an enterprisewide data and analytics approach. Most focus on targeted business functions such as pricing, underwriting and financial management, according to a survey of 72 P&C insurance professionals by Strategy Meets Action, an insurance strategic advisory firm in Boston.

“But [a siloed approach] is not going to be enough to differentiate and compete in this fast-changing marketplace,” said SMA partner Denise Garth. “Data analytics needs to take an enterprisewide approach that includes external telematics, [and] social and mobile data, so they can really leverage the power of analytics.”

Only about half of P&C insurers report that they have advanced reporting (12 percent enterprisewide and 36 percent in key areas).

Social Media and Mobile

Leveraging unstructured data from social and mobile is particularly important in designing products that customers want, according to a study by IBM’s Institute of Business Value.

Senior executives from 80 insurers surveyed by IBM said they are leveraging the cloud, big data, analytics and social technologies to “leapfrog the competition” in this way.

And nearly three-fourths (72 percent) of the insurers identified by IBM as market leaders in the study said they use social media to communicate with customers “to a considerable degree” — almost twice as much as non-leaders.

“Structures don’t make a lot of sense if insurers are building them in a vacuum — they need to reflect how insurers are targeting certain customer sets.” — Christian Bieck, global insurance leader, IBM Institute of Business Value

Big data analytics should incorporate four dimensions — customers, interactions, services and structure, said Christian Bieck, IBM Institute’s global insurance leader who is based in Stuttgart, Germany.

“The combination of those dimensions is very important, because insurers can only build new products and services in a sensible way if they have insight into what the customer actually wants,” he said.

“Structures don’t make a lot of sense if insurers are building them in a vacuum — they need to reflect how insurers are targeting certain customer sets,” Bieck said.

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Strategies like these enable insurers to transition from the more traditional “organization-centric,” product-driven model to one that reflects the emerging “everyone-to-everyone (E2E) economy,” based on higher levels of collaboration between companies and their customers, Bieck said.

Insurers need to bring their historically strong analytical capabilities for predicting exposures to the marketing arena, particularly to cross-sell and up-sell to existing customers, said Sharad Sachdev, a managing director at Accenture in New York.

As part of this, insurers should follow the lead of the banking industry and analyze internal data of past marketing successes as well as competitor data and unstructured data from social and mobile to develop “propensity scores” — to determine which customers are more likely than others to accept certain offers.

“Consumers have many choices, so insurers can’t make offers in a vacuum, and that’s where social media comes into play,” Sachdev said.

Focus on Core Business

John Lucker a principal at Deloitte Consulting LLP in Hartford, Conn., who is the firm’s global advanced analytics and modeling market leader, said that most insurers are still struggling with how to best gain insights from past and current events, and are just beginning to adequately use predictive analytics for future events.

However, he said, “I think emerging technologies and analytics should be more R&D and exploratory, while companies should spend the bulk of their time getting good at the core of their business.”

If an insurer’s underlying organizational structure is not profitable, going after more customers isn’t going to make them more profitable; in fact, it might actually raise their expense ratio and make them less profitable, he said.

“They need to first be really good at pricing and understanding exposures, before they focus on getting more customers,” Lucker said. “I would suggest once an insurer has a combined ratio well below 100, maybe that’s something to talk about.”

The SMA report indicated that P/C insurers will spend more on predictive analytics, with nearly two in five (38 percent) planning budget increases of at least 6 percent per year over the next three years.

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But, the bulk of the spend will be on claims recovery, and fraud prevention and detection, with almost half of the respondents piloting projects or planning future investments.

Insurers are beginning to evolve analytics for marketing and distributions, with survey respondents reporting new projects in customer segmentation, “single view” of the customer, and customer “lifetime value.”

Customer segmentation is the top area for new projects over the next three years, with 43 percent of insurers planning efforts in that area, and another 10 percent piloting or evaluating today, according to SMA.

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Lead Story

Improving the Claims Experience

Insureds and carriers agree that more communication can address common claims complaints.
By: | January 10, 2018 • 7 min read

Carriers today often argue that buying their insurance product is about much more than financial indemnity and peace of mind.

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Many insurers include a variety of risk management services and resources in their packages to position themselves as true risk partners who help clients build resiliency and prevent losses in the first place.

That’s all well and good. No company wants to experience a loss, after all. But even with the added value of all those services, the core purpose of insurance is to reimburse loss, and policyholders pay premiums because they expect delivery on that promise.

At the end of the day, nothing else matters if your insurer can’t or won’t pay your claim, and the quality of the claims experience is ultimately the barometer by which insureds will judge their insurer.

Why, then, is the process not smoother? Insureds want more transparency and faster claims payment, but claims examiners are often overburdened and disconnected from the original policy. Where does the disconnect come from, and how can it be bridged?

Both sides of the insurer-insured equation may be responsible.

Susan Hiteshew, senior manager of global insurance and risk management, Under Armor Inc.

“One of the difficult things in our industry is that oftentimes insureds don’t call their insurer until they have a claim,” said Susan Hiteshew, senior manager of global insurance and risk management for Under Armour Inc.

“It’s important to leverage all of the other value that insurers offer through mid-term touchpoints and open communication. This can help build the insurer-insured partnership so that when a claim materializes, the relationships are already established and the claim can be resolved quickly and fairly.”

“My experience has been that claims executives are often in the background until there is an issue that needs addressing with the policyholder,” said Dan Holden, manager of corporate risk and insurance for Daimler Trucks North America.

“This is unfortunate because the claims department essentially writes the checks and they should certainly be involved in the day to day operations of the policyholders in designing polices that mitigate claims.

“By being in the shadows they often miss the opportunity to strengthen the relationship with policyholders.”

Communication Breakdown

Communication barriers may stem from internal separation between claims and underwriting teams. Prior to signing a contract and throughout a policy cycle, underwriters are often in contact with insureds to keep tabs on any changes in their risk profile and to help connect clients with risk engineering resources. Claims professionals are often left out of the loop, as if they have no proactive role to play in the insured-insurer relationship.

“Claims operates on their side of the house, ready to jump in, assist and manage when the loss occurs, and underwriting operates in their silo assessing the risk story,” Hiteshew said.
“Claims and underwriting need to be in lock-step to collectively provide maximum value to insureds, whether or not losses occur.”

Both insureds and claims professionals agree that most disputes could be solved faster or avoided completely if claims decision-makers interacted with policyholders early and often — not just when a loss occurs.

“Claims and underwriting need to be in lock-step to collectively provide maximum value to insureds, whether or not losses occur.” – Susan Hiteshew, senior manager of global insurance and risk management for Under Armour Inc.

“Communication is critically important and in my opinion, should take place prior to binding business and well before a claim comes in the door,” said David Crowe, senior vice president, claims, Berkshire Hathaway Specialty Insurance.

“In my experience, the vast majority of disputes boil down to lack of communication and most disputes ultimately are resolved when the claim decision-maker gets involved directly.”

Talent and Resource Shortage

Another contributing factor to fractured communication could be claims adjuster workload and turnover. Claims adjusting is stressful work to begin with.

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Adjusters normally deal with a high volume of cases, and each case can be emotionally draining. The customer on the other side is, after all, dealing with a loss and struggling to return to business as usual. At some TPAs, adjuster turnover can exceed 25 percent.

“This is a difficult time for claims organizations to find talent who want to be in this business long-term, and claims organizations need to invest in their employees if they’re going to have any success in retaining them,” said Patrick Walsh, executive vice president of York Risk Services Group.

The claims field — like the insurance industry as a whole — is also strained by a talent crunch. There may not be enough qualified candidates to take the place of examiners looking to retire in the next ten years.

“One of the biggest challenges facing the claims industry is a growing shortage of talent,” said Scott Rogers, president, National Accounts, Sedgwick. “This shortage is due to a combination of the number of claims professionals expected to retire in the coming years and an underdeveloped pipeline of talent in our marketplace.

“The lack of investment in ensuring a positive work environment, training, and technology for claims professionals is finally catching up to the industry.”

The pool of adjusters gets stretched even thinner in the aftermath of catastrophes — especially when a string of catastrophes occurs, as they did in the U.S in the third quarter of 2017.

“From an industry perspective, Harvey, Irma and Maria reminded us of the limitations on resources available when multiple catastrophes occur in close succession,” said Crowe.

“From independent and/or CAT adjusters to building consultants, restoration companies and contractors, resources became thin once Irma made landfall.”

Is Tech the Solution?

This is where Insurtech may help things. Automation of some processes could free up time for claims professionals, resulting in faster deployment of adjusters where they’re needed most and, ultimately, speedier claims payment.

“There is some really exciting work being done with artificial intelligence and blockchain technologies that could yield a meaningful ROI to both insureds and insurers,” Hiteshew said.

“The claim set-up process and coverage validation on some claims could be automated, which could allow adjusters to focus their work on more complex losses, expedite claim resolution and payment as well.”

Dan Holden, manager, Corporate Risk & Insurance, Daimler Trucks North America

Predictive modeling and analytics can also help claims examiners prioritize tasks and maximize productivity by flagging high-risk claims.

“We use our data to identify claims with the possibility of exceeding a specified high dollar amount in total incurred costs,” Rogers said. “If the model predicts that a claim will become a large loss, the claim is redirected to our complex claims unit. This allows us to focus appropriate resources that impact key areas like return to work.”

“York has implemented a number of models that are focused on helping the claims professional take action when it’s really required and that will have a positive impact on the claim experience,” Walsh said.

“We’ve implemented centers of excellence where our experts provide additional support and direction so claim professionals aren’t getting deluged with a bunch of predictive model alerts that they don’t understand.”

“Technology can certainly expedite the claims process, but that could also lead to even more cases being heaped on examiners.” — Dan Holden, manager, Corporate Risk & Insurance, Daimler Trucks North America

Many technology platforms focused on claims management include client portals meant to improve the customer experience by facilitating claim submission and communication with examiners.

“With convenient, easy-to-use applications, claimants can send important documents and photos to their claims professionals, thereby accelerating the claims process. They can designate their communication preferences, whether it’s email, text message, etc.,” Sedgwick’s Rogers said. “Additionally, rules can be established that direct workflow and send real time notifications when triggered by specific claim events.”

However, many in the industry don’t expect technology to revolutionize claims management any time soon, and are quick to point out its downsides. Those include even less personal interaction and deteriorating customer service.

While they acknowledge that Insurtech has the potential to simplify and speed up the claims workflow, they emphasize that insurance is a “people business” and the key to improving the claims process lies in better, more proactive communication and strengthening of the insurer-insured relationship.

Additionally, automation is often a double-edged sword in terms of making work easier for the claims examiner.

“Technology can certainly expedite the claims process, but that could also lead to even more cases being heaped on examiners,” Holden said.

“So while the intent is to make things more streamlined for claims staff, the byproduct is that management assumes that examiners can now handle more files. If management carries that assumption too far, you risk diminishing returns and examiner burnout.”

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By further taking real people out of the equation and reducing personal interaction, Holden says technology also contributes to deteriorating customer service.

“When I started more than 30 years ago as a claims examiner, I asked a few of the seasoned examiners what they felt had changed since they began their own careers 30 year earlier. Their answer was unanimous: a decline in customer service,” Holden said.

“It fell to the wayside to be replaced by faster, more impersonal methodologies.”

Insurtech may improve customer satisfaction for simpler claims, allowing policyholders to upload images with the click of a button, automating claim valuation and fast-tracking payment. But for complex claims, where the value of an insurance policy really comes into play, tech may do more harm than good.

“Technology is an important tool and allows for more timely payment and processing of claims, but it is not THE answer,” BHSI’s Crowe said. “Behind all of the technology is people.” &

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]