Weaving Today’s Threads to Build a New Future of Insurance
I love history. It is rich with ideas and insights. One of those things I love are tapestries. Tapestries have long been used as artistic expressions that tell history — heavy fabrics with meaning and intention. The weaving of these fabrics interlaced perpendicular sets of threads together to weave and design the tapestries. Historical tapestries became a great symbol of status and influence at the time, but as history evolved they became remnants for a different time.
Why do I share this? Because insurance business models and assumptions of the last 30-50 years are like tapestries. They defined the status and influence of insurance companies based on how the industry defined (or weaved) together the threads – products, processes, systems, channels and data. The emergence of InsurTech and the proliferation of new data sources and the use of these data sources to disrupt risk assessment, underwriting through claims, has begun the unraveling of our historical tapestry into a new modern fabric that will be more agile, resilient and relevant in a new era of insurance.
Data – The Thread Reweaving the Future of Insurance
In a product-rich industry, supply and demand share a crucial link. When demand is met by an adequate supply, priced properly, and supplied through the right channels, profit happens. This is true if you sell tangible items, such as shoes, watches, cars or computers, and it is true if you sell intangible items, such as vacations, concerts, video streaming or insurance. Companies that can find the magic balance between pricing and demand achieve something greater than simple profits. They gain coveted market momentum. But that will only take you so far. Because in today’s customer-driven marketplace, it all about market value, confidence and personalization to their needs and expectations.
In this shift from product to customer-driven, the thread that binds customer, demand, supply and profit together is data.
Data has the ability to personalize the customer experience while also improving marketing effectiveness, enhancing pricing accuracy, expanding the ability to capitalize on new channels, reducing claims fraud, and creating improved profit.
For most insurers, however, there are some real hurdles to building and creating an optimal data environment. The greatest hurdle, surprisingly, may simply be data stakeholders within the insurance organization holding on to history. Necessary foundational data changes will only stick if they achieve widespread adoption among those within the insurance company. People are the key to the change. Technology can allow for new behaviors and incredible advances, but people have to engage with the technology and be open to a new data thread to make it happen.
In Majesco’s recent webinar, Building a Data-driven Foundation to Shape the Future of Insurance, we looked at what it will take for insurers to capitalize on the data opportunities that are readily available and just how ripe the market is for change. In today’s blog, we’ll share some of those insights and in an upcoming blog, take a peek into a well-run data organization. Our goal is to see that data is best considered as a FOUNDATIONAL asset, not a provisionary asset. If the organization becomes data-driven instead of seeing data as a kind of add-on, that foundation will be strong enough to support all efforts.
High priorities. Real desire for change. Uncertain first steps.
In Majesco’s Strategic priorities research, we found that Data and Analytics Capabilities are a top concern among the 16 internal and external challenges. This crosses all types of insurers and all levels of tech advancement.
So, we know that insurers desire a data foundation. On the flip side, we can also see that customers are ready for personalized data-driven pricing. In our research for both Individual customers and small-to-medium businesses, we found that between 46% and 60% of them are very willing to use products that are priced (at least in part) based on the use of the data that they uniquely generate. This confluence of desire on both ends has made real change mandatory. Insurers need to catch up. But where do insurers apply their efforts? Is there a right first step?
“There is a lot of hype around data and analytics,” said Ben Moreland, Vice-President Data and Analytics, Majesco, “and a lot of disjointed efforts that are going on…a lot of interest and intrigue in advanced analytics. The belief is that if I can just get my hands on the right data, then I’m going to start seeing amazing benefits and value.”
Taking the first step, then, requires more than just acquiring sources of valuable data. This is because strategies are inconsistent and there is no master strategy — one that operates at an enterprise level and takes all needs and benefits of different parts of the organization into consideration. There may be excellent data within a department, but that may not be available to the rest of the enterprise, limiting value and opportunities. In a Crawl-Walk-Run-Sprint strategy, most are stuck in Crawl-Walk because they are using one data set at a time, and not sharing or using it enterprise-wide. Every time they approach something new, they are reinventing the same cycles.
When discussing enterprise data governance and strategy, most are still at the lowest levels, challenged with who should be overseeing data governance and what kind of granularity they need to be looking at within the data. They are making low-level decisions and not tackling the tougher, but more crucial determinations about data strategy and direction for the company.
How can insurers turn existing and new sources of data into an enterprise business asset?
Insurers need to consider what they want out of their data, both in results and in how they engage with the data.
Most insurers want:
- Consistent, trustworthy, self-service reporting that is clean, governed, and well-defined. (An example: How many definitions does your organization have for something like earned premium? If everyone has established their own definition, the data that it affects is ungoverned and inconsistent.)
- The ability to make the right business decisions with this data.
- They do NOT want to have to go through IT to get a report from them that is static, or delayed. This can take weeks to create. (An example: Receiving a root-cause analysis report from IT can come well after it is useful to the business.)
- Analytics need to be easy to use, requiring no technical training.
- They want to change the business culture to be data-driven, so that they can capture on-demand insights.
- Want access to data, existing and new sources, to use with AI and machine learning to drive new opportunities, processes, products and more.
How can insurers find a solution that fits all of these requirements?
The future of insurance begins with a properly-constructed data foundation. Insurers have lots of data in their policy, claims, and billing systems, as well as external data. Everything is siloed. They want to move towards more advanced analytics using AI and machine learning using historic data sets to train and create data models that can be frequently updated for the business.
Insurers can establish foundational data and analytics by implementing four necessary solutions. These meet the desires of the business, answer data’s capture and storage issues and open up the data realms to usability across the organization. Majesco provides these solutions to insurers that act as the construction tools for establishing fresh data foundations in less time with better, permanent results. These include:
- A true, integrated, Enterprise Data Warehouse.
- A top-tier Insurance Data and Analytics platform solution.
- A self-service, business intelligence front-end to allow users to interact with, filter and run ad hoc queries.
- AI and machine learning capabilities via partners like DataRobot.
All of this is the foundation of advanced analytics…the solutions designed to create a true data and analytics platform that will allow for plug and play data streams and capabilities that enable insurers to rapidly adopt advanced analytics.
- But this requires one further step: A change in the business culture to data-driven and on-demand insights.
Is it time for your organization to leave behind its historical, moment-by-moment data strategies and establish a forward-thinking data strategy for the future? If so, begin to weave the threads of your data strategy together to shape your future of insurance.
For an excellent overview of how Majesco is helping insurers to establish a lasting foundation for data and analytics, and an insightful case study from Miller’s Mutual Insurance, be sure to tune in to Majesco’s webinar, Building a Data-Driven Foundation to Shape the Future of Insurance.