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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/.

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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: Workers' Comp

Do You Have Employees or Gig Workers?

The number of gig economy workers is growing in the U.S. But their classification as contractors leaves many without workers’ comp, unemployment protection or other benefits.
By: and | July 30, 2018 • 5 min read

A growing number of Americans earn their living in the gig economy without employer-provided benefits and protections such as workers’ compensation.

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With the proliferation of on-demand services powered by digital platforms, questions surrounding who does and does not actually work in the gig economy continue to vex stakeholders. Courts and legislators are being asked to decide what constitutes an employee and what constitutes an independent contractor, or gig worker.

The issues are how the worker is paid and who controls the work process, said Bobby Bollinger, a North Carolina attorney specializing in workers’ compensation law with a client roster in the trucking industry.

The common law test, he said, the same one the IRS uses, considers “whose tools and whose materials are used. Whether the employer is telling the worker how to do the job on a minute-to-minute basis. Whether the worker is paid by the hour or by the job. Whether he’s free to work for someone else.”

Legal challenges have occurred, starting with lawsuits against transportation network companies (TNCs) like Uber and Lyft. Several court cases in recent years have come down on the side of allowing such companies to continue classifying drivers as independent contractors.

Those decisions are significant for TNCs, because the gig model relies on the lower labor cost of independent contractors. Classification as an employee adds at least 30 percent to labor costs.

The issues lie with how a worker is paid and who controls the work process. — Bobby Bollinger, a North Carolina attorney

However, a March 2018 California Supreme Court ruling in a case involving delivery drivers for Dynamex went the other way. The Dynamex decision places heavy emphasis on whether the worker is performing a core function of the business.

Under the Dynamex court’s standard, an electrician called to fix a wiring problem at an Uber office would be considered a general contractor. But a driver providing rides to customers would be part of the company’s central mission and therefore an employee.

Despite the California ruling, a Philadelphia court a month later declined to follow suit, ruling that Uber’s limousine drivers are independent contractors, not employees. So a definitive answer remains elusive.

A Legislative Movement

Misclassification of workers as independent contractors introduces risks to both employers and workers, said Matt Zender, vice president, workers’ compensation product manager, AmTrust.

“My concern is for individuals who believe they’re covered under workers’ compensation, have an injury, try to file a claim and find they’re not covered.”

Misclassifying workers opens a “Pandora’s box” for employers, said Richard R. Meneghello, partner, Fisher Phillips.

Issues include tax liabilities, claims for minimum wage and overtime violations, workers’ comp benefits, civil labor law rights and wrongful termination suits.

The motive for companies seeking the contractor definition is clear: They don’t have to pay for benefits, said Meneghello. “But from a legal perspective, it’s not so easy to turn the workforce into contractors.”

“My concern is for individuals who believe they’re covered under workers’ compensation, have an injury, try to file a claim and find they’re not covered in the eyes of the state.” — Matt Zender, vice president, workers’ compensation product manager, AmTrust

It’s about to get easier, however. In 2016, Handy — which is being sued in five states for misclassification of workers — drafted a N.Y. bill to establish a program where gig-economy companies would pay 2.5 percent of workers’ income into individual health savings accounts, yet would classify them as independent contractors.

Unions and worker advocacy groups argue the program would rob workers of rights and protections. So Handy moved on to eight other states where it would be more likely to win.

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So far, the Handy bills have passed one house of the legislature in Georgia and Colorado; passed both houses in Iowa and Tennessee; and been signed into law in Kentucky, Utah and Indiana. A similar bill was also introduced in Alabama.

The bills’ language says all workers who find jobs through a website or mobile app are independent contractors, as long as the company running the digital platform does not control schedules, prohibit them from working elsewhere and meets other criteria. Two bills exclude transportation network companies such as Uber.

These laws could have far-reaching consequences. Traditional service companies will struggle to compete with start-ups paying minimal labor costs.

Opponents warn that the Handy bills are so broad that a service company need only launch an app for customers to contract services, and they’d be free to re-classify their employees as independent contractors — leaving workers without social security, health insurance or the protections of unemployment insurance or workers’ comp.

That could destabilize social safety nets as well as shrink available workers’ comp premiums.

A New Classification

Independent contractors need to buy their own insurance, including workers’ compensation. But many don’t, said Hart Brown, executive vice president, COO, Firestorm. They may not realize that in the case of an accident, their personal car and health insurance won’t engage, Brown said.

Matt Zender, vice president, workers’ compensation product manager, AmTrust

Workers’ compensation for gig workers can be hard to find. Some state-sponsored funds provide self-employed contractors’ coverage.  Policies can be expensive though in some high-risk occupations, such as roofing, said Bollinger.

The gig system, where a worker does several different jobs for several different companies, breaks down without portable benefits, said Brown. Portable benefits would follow workers from one workplace engagement to another.

What a portable benefits program would look like is unclear, he said, but some combination of employers, independent contractors and intermediaries (such as a digital platform business or staffing agency) would contribute to the program based on a percentage of each transaction.

There is movement toward portable benefits legislation. The Aspen Institute proposed portable benefits where companies contribute to workers’ benefits based on how much an employee works for them. Uber and SEI together proposed a portable benefits bill to the Washington State Legislature.

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Senator Mark Warner (D. VA) introduced the Portable Benefits for Independent Workers Pilot Program Act for the study of portable benefits, and Congresswoman Suzan DelBene (D. WA) introduced a House companion bill.

Meneghello is skeptical of portable benefits as a long-term solution. “They’re a good first step,” he said, “but they paper over the problem. We need a new category of workers.”

A portable benefits model would open opportunities for the growing Insurtech market. Brad Smith, CEO, Intuit, estimates the gig economy to be about 34 percent of the workforce in 2018, growing to 43 percent by 2020.

The insurance industry reinvented itself from a risk transfer mechanism to a risk management mechanism, Brown said, and now it’s reinventing itself again as risk educator to a new hybrid market. &

Susannah Levine writes about health care, education and technology. She can be reached at [email protected] Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]