ITA Pro Magazine - February 2014

Insurers have different ways of going about the use of data analytics. It is apparent, though, that the future of insurance hinges on how well carriers use the data they have collected for decades and match it with third-party data to draw meaningful conclusions on risks, policyholders, and even agents.

Miguel Edwards, director of technology, Allstate Ivantage Select and a member of the Insurance Technology Association advisory board, believes analytics is changing the way insurers think about their business, particularly through the prevention of risks. If carriers think about coverage from a prevention aspect, insurers can use data feeds from companies that digitize applications and cross reference against their own database.

“Is this customer using a licensed
and bonded contractor?” asks Edwards.
“Is this guy doing the work himself and
needs a builders’ risk policy? One com-
pany entered into a partnership with an
alarm company. How is capturing alarm
events impacting their protection?
Those are all examples of openness. A
handful of large carriers, are capitalizing
Novarica conducted a survey in 2013
and asked insurers what they were doing
with analytics. Martina Conlon, a partner
with Novarica, reports that risk score
was one of the top areas carriers use to
identify the score around a property or a
driver in order to determine if it is going
to be a profitable risk for the insurer or
whether there will be significant claims.

Another area for analytics involves claims, although Conlon expressed surprise that insurers are not using it as significantly there as they are in underwriting. Insurers are using claims fraud scores and claims severity scores, but the survey showed only about one-third of insurers are doing that.

“There really are big benefits [in claims scoring],” said Conlon. “Insurers are operationalized in terms of the core systems they use as well as enable rules engines or third-party services in order to execute the models. Risk scores and claims related scores are the most commonly used.”

Tools Improving

Analytics tools are getting better, according to Bryan Fowler, CIO of Oregon Mutual Insurance, but he hasn’t found them to be as intuitive as business users would like.

“Some are more user friendly for
non-data scientists. Some aren’t insurer
centric, but it does put power in the user’s
hands,” he says
Fowler doesn’t believe insurers should
focus strictly on industry-specific tools.

“If you need industry-specific tools you are trying to confine the uses of data by defining industry values,” he says. “It’s like big data vs. relational data bases. You spend months getting data exactly how you want it, but if you ask a question