The insurance business has always been driven by data; without the accurate assessment of risk, the industry wouldn`t even exist. Yet despite the importance of information, many insurers have limited ability to organize and analyze their own data.

vertafore-birstThe insurance market is worth more than $2 trillion dollars and venture capitalists are working hard to get a piece of the market. They`ve invested more than $2.2 billion dollars in insurance startups in the last five years and most of these companies are built with data analytics at their core. Carriers need to embrace new technologies to stay competitive while managing financial risk.

Big data and analytics are at the forefront of these new technology investments. According to research by IT market research firm Gartner and the National Association of Insurance Commissioners, investments have increased from five percent in 2012 to 42 percent in 2014.

From Data to Insight to Smart Decisions

While the majority of customers value the power of data-driven decision making, they lack the time and resources to gain insights from data in its raw form. To help customers thrive in an era of disruption, it is critical to provide carriers, agencies, and brokers with analytics to help generate risk scores, build customer profiles, and identify growth opportunities.

Vertafore is working to take raw data from across the distribution channel to help our customers identify opportunities, grow their client bases, mitigate risks, and optimize business operations. Less than a year ago, Vertafore announced a strategic partnering with cloud business intelligence provider Birst. In just a few short months, we‘ve released an analytics product that analyzes large and unique data sets, including 123 million transactions. This new product is making it possible for customers to visually explore the data, gain insights, and take action in their organization.

To create an embedded analytics solution tailored for the insurance industry, we had to address the following challenges:

  • Bridge the gap in market knowledge: Insurance companies hold invaluable domain knowledge, yet to use that area expertise to their advantage, they need to be equipped with data insights. While they hold the context and market knowledge to gain insights from the data, they don`t always have the skillset or time to perform analysis. On the other end of the spectrum, data scientists, who are analytically advanced, don`t typically understand the insurance lifecycle well enough to glean insights from raw data. With a modern, cloud-architected BI platform, we could deliver both an easy-to-use front-end for customers, as well as a robust back-end that can ingest and model large volumes of data—all in one platform.
  • Anticipate changing customer needs: Put simply, the insurance industry is all about managing risk. Carriers collect data from policyholders and analyze their demographics, household information, health statistics, driving records, and financial histories. They then combine that with external data (weather, crime rates) to construct the appropriate financial instrument or policy offer to balance risk with return. Correctly determining a new customer`s risk profile enables the insurance carrier to accept or reject the customer and price appropriately. Understanding an existing customer`s life changes enables the insurer to assemble the optimal offers, discounts, and bundles to retain and expand customer loyalty. To handle this challenge, business intelligence initiatives must continue the move toward predictive analytics that anticipate the changing needs of customers.
  • Connect to multiple data sources: Insurance carriers need to utilize rich data sources to identify patterns and rule out signal from noise. That means combining company internal data sources and external data sources that take different forms. For example, Vertafore`s data sources include raw insurance data from 20,000 agencies, 1,600 carriers and 230 million policies. With better access to third-party data from a variety of sources, insurers can better understand risk. They can effectively pinpoint the probability that a person will be in a car accident or experience flood damage to their home in a given geographic radius. With Birst`s automated data refinement, these growing data sources can be transformed for useful analysis at the speed of commercial markets.
  • Personalize solutions by role and business: Depending on your role in your organization, you need to see data in different ways.  An office manager needs to see where there might be bottlenecks in transactional processing or how many policies are renewing next month through operational reporting; however, an executive needs visual dashboards to see trends and projections. Building solutions based upon your role helps you deliver specific insights into your business and allow you to make data-driven decisions.

Overcoming these challenges by incorporating the right data analytics solution will give a carrier the ability to understand the broader market, make sound business decisions, manage risks, and increase its standing as a carrier of choice for agencies. Those that break through the status quo and embrace data analytics will deliver the greatest value to customers and help their company future-proof their technology investments.

Theo Beack is Senior Vice President and Chief Technology Officer at Vertafore. The preceding article was originally published on May 16, 2016 in the Insurance Technology Association blog.