Sponsored: Ventiv Technology

Risk Managers: Harness the Power of Data and Analytics

Data is everywhere, and technology has given risk managers the tools to work with it directly, finding the answers they need to drive their businesses forward.
By: | March 6, 2018 • 5 min read

By Kristi McFarlin, Vice President, Analytics, Ventiv Technology

Data and analytics have always been the language of insurance.

“Go back to the early days of Lloyd’s, when underwriters of the day met in coffee houses to share their experiences around which ships successfully made it to port. That’s how marine insurance began – with people pooling information and using it to inform business decisions,” said Rob Hoyt, Department Head and Professor of Risk Management and Insurance in the Terry College of Business at the University of Georgia.

But as the insurance industry became more formalized, actuarial science emerged as a way to institutionalize the process of collecting data and applying it to the practice of evaluating and pricing risk. As data analytics fueled the growth and sophistication of the insurance and risk management industry, it also grew increasingly siloed to a subset of specialists.

Actuaries and data scientists became the experts at drawing in concepts from mathematics and applying them to analyze and measure risk. Within an organization, there are typically a select few experts or service providers who are responsible for the data.

But all of that is changing.

New technologies are lifting the veil shrouding data analytics and making it more accessible to the end user – risk managers and business practitioners with the decision-making power to apply analytical findings to implement operational changes.

“As computing power and the pervasiveness of data increase exponentially, the walls between data professionals and risk management professionals have broken down,” Hoyt said. “As a result, it’s critical that a broader set of individuals in risk management understand the fundamentals of data analytics.”

User-Friendly Tools Enable Risk Professionals to Answer Critical Business Questions

Rob Hoyt
Department Head and Professor of Risk Management and Insurance in the Terry College of Business at the University of Georgia

Risk managers have an opportunity to provide enterprise-level value by spending less time collecting information and more time finding answers.

And this is what CEOs and Boards are looking for. More than ever, they need someone who can work with data quickly and operationalize their findings. Risk managers are in a prime position to fill that role and enhance their value within their organizations, while driving the business forward.

The approach to data analysis has become more agile, self-service and intuitive. Advancements in technology have helped us produce analytical tools that let the business practitioner do the data exploration themselves.

Artificial intelligence and the ability to use natural language to explore data, for example, allows lay people to ask critical business questions and find the answers themselves.

At Ventiv, we partnered with IBM to implement Watson Analytics. It’s just like asking a question of Google or Siri. Instead of figuring out how to get access to data, explore it, and get questions answered, risk managers are empowered to jump in and query their data directly and generate automated predictive analytics without the need to engage a professional data scientist.

Dr. Hoyt has already seen some health care risk managers take advantage of AI-driven analytical tools to identify the root of their exposures. Hospital staff and administrators already know that patient falls are a top risk – but do they know enough about those falls to prevent them from happening in the first place? Natural language querying makes it easier for risk managers to probe their history and look for common threads.

“Now, they can identify the common characteristics of patients most likely to fall, which serves as a starting point for targeted prevention efforts,” Hoyt said. “It’s an example of making data actionable in a clear business context.”

Modern analytical tools also allow risk managers to integrate third party data to gain a more holistic view of their exposure. Examining external parameters like weather patterns, census records or building materials against an organization’s loss experience and claims data can illuminate links that inform a new risk mitigation approach.

Comparing building materials and climate conditions to property losses, for example, can help determine if certain locations are more susceptible to mold. If you can see that the building is in a high-moisture region, you can go back to the building materials and cleaning protocols and find new ways to prevent and mitigate mold damage.

Predictive analytics, also enabled by third party data integration, increasingly play a role in business decisions as well.

“Large consumer retailers have used predictive analytics around weather data to reroute inventory where they expect a spike in demand. If one of their locations is in the path of a hurricane, they can send more water and other practical supplies their way,” Hoyt said. “They harness the power of analytics to satisfy a customer that hasn’t even emerged yet.”

An abundance of data and intuitive modeling tools allow risk managers to drive these strategic decisions and enable true enterprise risk management across their organizations.

Risks of User Error

Kristi McFarlin
Vice President, Analytics, Ventiv Technology

Despite the user-friendly nature of modern analytical tools, they can create more risk for an organization if that user lacks basic understanding of data science. Risk managers and other business leaders still have to ask the right questions and understand how to interpret those results.

Introducing bias is one risk. Leading or narrow questions may produce the results that a risk manager wants to see, but they may not be accurate if they are not comprehensive. Misinterpreting the answers can also undermine data’s usefulness.

“There’s an interesting statistic that the interest rate in the U.S. is positively correlated with the height of the Fed chair. So rates were really high when Paul Volcker was the chair at 6’7”, but dropped way down when Janet Yellen took over,” Hoyt said. “Of course, the Fed chair’s height isn’t driving interest rates, but it’s a simple example of how critical it is to separate correlation from causation. Without that distinction, results are skewed and meaningless.”

A Partner with Data and Domain Expertise

The opportunity for risk managers to take a leading role in data analysis is clear, but doing it well remains a challenge. There are two ways to better equip themselves: education and partnering with expert vendors.

Practicing risk managers can take their pick of educational options, ranging from hour-long webinars all the way up to professional designation courses and master’s programs in data analytics.

“At the University of Georgia, we made curriculum changes to ensure every undergraduate in the college of business understands how to use data to ask business questions,” Hoyt said. “We also added a Master’s in Business Analytics degree program that can serve risk managers already well into their careers.”

As a graduate of UGA’s risk management program myself, and a technology employer, I can testify that recruiters increasingly want new hires to come with this education and experience already under their belts.

Those are the kind of graduates that we at Ventiv are interested in hiring because they are prepared to meet the demands of the data and analytical needs, but they also have domain knowledge of risk management and insurance terminology.

To fill in the gaps and ensure data is handled and interpreted correctly, though, practicing risk managers need a vendor who also comes equipped with both data and domain expertise.

You would want to partner with a technology provider like Ventiv that knows your industry and knows how to empower you to make data-driven decisions that generate optimal outcomes like reducing claim frequency and severity. At Ventiv, we also understand the regulatory and reporting requirements around insurance.

And, of course, you would want to select the risk management software system with the best analytics, reporting, and data-discovery tools for your needs. As the first and only provider in our sector of the risk technology market to offer Watson Analytics as an embedded, fully integrated component of our software solution, we think Ventiv is the obvious choice. That’s because with Watson Analytics, Ventiv has reimagined what advanced analytics can do for the risk, claims, and safety profession.

To learn more about Ventiv Technology’s solutions for the risk management and insurance industry, visit http://www.ventivtech.com/.



This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Ventiv Technology. The editorial staff of Risk & Insurance had no role in its preparation.

Our people, software, and innovative solutions empower organizations to achieve optimal results of their risk, insurance, and safety programs. Through the depth and breadth of our software solutions, global capabilities, and domain expertise, we are the proven leader in supporting virtually every type of industry and the largest and most complex companies in the world. Ventiv Technology proudly partners with over 550 organizations and 300,000 users in more than 40 countries.

Risk Focus: Cyber

Expanding Cyber BI

Cyber business interruption insurance is a thriving market, but growth carries the threat of a mega-loss. 
By: | March 5, 2018 • 7 min read

Lingering hopes that large-scale cyber attack might be a once-in-a-lifetime event were dashed last year. The four-day WannaCry ransomware strike in May across 150 countries targeted more than 300,000 computers running Microsoft Windows. A month later, NotPetya hit multinationals ranging from Danish shipping firm Maersk to pharmaceutical giant Merck.


Maersk’s chairman, Jim Hagemann Snabe, revealed at this year’s Davos summit that NotPetya shut down most of the group’s network. While it was replacing 45,000 PCs and 4,000 servers, freight transactions had to be completed manually. The combined cost of business interruption and rebuilding the system was up to $300 million.

Merck’s CFO Robert Davis told investors that its NotPetya bill included $135 million in lost sales plus $175 million in additional costs. Fellow victims FedEx and French construction group Saint Gobain reported similar financial hits from lost business and clean-up costs.

The fast-expanding world of cryptocurrencies is also increasingly targeted. Echoes of the 2014 hack that triggered the collapse of Bitcoin exchange Mt. Gox emerged this January when Japanese cryptocurrency exchange Coincheck pledged to repay customers $500 million stolen by hackers in a cyber heist.

The size and scope of last summer’s attacks accelerated discussions on both sides of the Atlantic, between risk managers and brokers seeking more comprehensive cyber business interruption insurance products.

It also recently persuaded Pool Re, the UK’s terrorism reinsurance pool set up 25 years ago after bomb attacks in London’s financial quarter, to announce that from April its cover will extend to include material damage and direct BI resulting from acts of terrorism using a cyber trigger.

“The threat from a cyber attack is evident, and businesses have become increasingly concerned about the extensive repercussions these types of attacks could have on them,” said Pool Re’s chief, Julian Enoizi. “This was a clear gap in our coverage which left businesses potentially exposed.”

Shifting Focus

Development of cyber BI insurance to date reveals something of a transatlantic divide, said Hans Allnutt, head of cyber and data risk at international law firm DAC Beachcroft. The first U.S. mainstream cyber insurance products were a response to California’s data security and breach notification legislation in 2003.

Jimaan Sané, technology underwriter, Beazley

Of more recent vintage, Europe’s first cyber policies’ wordings initially reflected U.S. wordings, with the focus on data breaches. “So underwriters had to innovate and push hard on other areas of cyber cover, particularly BI and cyber crimes such as ransomware demands and distributed denial of service attacks,” said Allnut.

“Europe now has regulation coming up this May in the form of the General Data Protection Regulation across the EU, so the focus has essentially come full circle.”

Cyber insurance policies also provide a degree of cover for BI resulting from one of three main triggers, said Jimaan Sané, technology underwriter for specialist insurer Beazley. “First is the malicious-type trigger, where the system goes down or an outage results directly from a hack.

“Second is any incident involving negligence — the so-called ‘fat finger’ — where human or operational error causes a loss or there has been failure to upgrade or maintain the system. Third is any broader unplanned outage that hits either the company or anyone on which it relies, such as a service provider.”

The importance of cyber BI covering negligent acts in addition to phishing and social engineering attacks was underlined by last May’s IT meltdown suffered by airline BA.

This was triggered by a technician who switched off and then reconnected the power supply to BA’s data center, physically damaging servers and distribution panels.

Compensating delayed passengers cost the company around $80 million, although the bill fell short of the $461 million operational error loss suffered by Knight Capital in 2012, which pushed it close to bankruptcy and decimated its share price.

Mistaken Assumption

Awareness of potentially huge BI losses resulting from cyber attack was heightened by well-publicized hacks suffered by retailers such as Target and Home Depot in late 2013 and 2014, said Matt Kletzli, SVP and head of management liability at Victor O. Schinnerer & Company.


However, the incidents didn’t initially alarm smaller, less high-profile businesses, which assumed they wouldn’t be similarly targeted.

“But perpetrators employing bots and ransomware set out to expose any firms with weaknesses in their system,” he added.

“Suddenly, smaller firms found that even when they weren’t themselves targeted, many of those around them had fallen victim to attacks. Awareness started to lift, as the focus moved from large, headline-grabbing attacks to more everyday incidents.”

Publications such as the Director’s Handbook of Cyber-Risk Oversight, issued by the National Association of Corporate Directors and the Internet Security Alliance fixed the issue firmly on boardroom agendas.

“What’s possibly of greater concern is the sheer number of different businesses that can be affected by a single cyber attack and the cost of getting them up and running again quickly.” — Jimaan Sané, technology underwriter, Beazley

Reformed ex-hackers were recruited to offer board members their insights into the most vulnerable points across the company’s systems — in much the same way as forger-turned-security-expert Frank Abagnale Jr., subject of the Spielberg biopic “Catch Me If You Can.”

There also has been an increasing focus on systemic risk related to cyber attacks. Allnutt cites “Business Blackout,” a July 2015 study by Lloyd’s of London and the Cambridge University’s Centre for Risk Studies.

This detailed analysis of what could result from a major cyber attack on America’s power grid predicted a cost to the U.S. economy of hundreds of billions and claims to the insurance industry totalling upwards of $21.4 billion.

Lloyd’s described the scenario as both “technologically possible” and “improbable.” Three years on, however, it appears less fanciful.

In January, the head of the UK’s National Cyber Security Centre, Ciaran Martin, said the UK had been fortunate in so far averting a ‘category one’ attack. A C1 would shut down the financial services sector on which the country relies heavily and other vital infrastructure. It was a case of “when, not if” such an assault would be launched, he warned.

AI: Friend or Foe?

Despite daunting potential financial losses, pioneers of cyber BI insurance such as Beazley, Zurich, AIG and Chubb now see new competitors in the market. Capacity is growing steadily, said Allnutt.

“Not only is cyber insurance a new product, it also offers a new source of premium revenue so there is considerable appetite for taking it on,” he added. “However, whilst most insurers are comfortable with the liability aspects of cyber risk; not all insurers are covering loss of income.”

Matt Kletzli, SVP and head of management liability, Victor O. Schinnerer & Company

Kletzli added that available products include several well-written, broad cyber coverages that take into account all types of potential cyber attack and don’t attempt to limit cover by applying a narrow definition of BI loss.

“It’s a rapidly-evolving coverage — and needs to be — in order to keep up with changing circumstances,” he said.

The good news, according to a Fitch report, is that the cyber loss ratio has been reduced to 45 percent as more companies buy cover and the market continues to expand, bringing down the size of the average loss.

“The bad news is that at cyber events, talk is regularly turning to ‘what will be the Hurricane Katrina-type event’ for the cyber market?” said Kletzli.

“What’s worse is that with hurricane losses, underwriters know which regions are most at risk, whereas cyber is a global risk and insurers potentially face huge aggregation.”


Nor is the advent of robotics and artificial intelligence (AI) necessarily cause for optimism. As Allnutt noted, while AI can potentially be used to decode malware, by the same token sophisticated criminals can employ it to develop new malware and escalate the ‘computer versus computer’ battle.

“The trend towards greater automation of business means that we can expect more incidents involving loss of income,” said Sané. “What’s possibly of greater concern is the sheer number of different businesses that can be affected by a single cyber attack and the cost of getting them up and running again quickly.

“We’re likely to see a growing number of attacks where the aim is to cause disruption, rather than demand a ransom.

“The paradox of cyber BI is that the more sophisticated your organization and the more it embraces automation, the bigger the potential impact when an outage does occur. Those old-fashioned businesses still reliant on traditional processes generally aren’t affected as much and incur smaller losses.” &

Graham Buck is editor of gtnews.com. He can be reached at riskletters.com.