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New Data Sources Key to Small Business Insurance in Shifting Landscape

As commercial insurance companies throughout the U.S. continue to look to expand their book of small business clients, they face unique challenges that have only been magnified by the COVID-19 crisis. For insurers, speed is now a key to success in this dynamic environment. Not only must they underwrite clients with policy renewals and generate new applications for those with continuously-evolving risk profiles, but they also must prevail in an environment marked by intensifying competition for the most desirable risks.


Digital transformation must drive small business insurers forward

According to a late-January report by Willis Towers Watson, 91% of insurers characterized their involvement with insurance technology companies that provide these services as nonexistent or early stage. If the same report were published today, you’d likely find that percentage inverted as competitive insurers place InsureTech solutions at the core of their digital innovation strategies. 

In two recent examples, both Farmers Insurance and The Hartford have announced partnerships with Carpe Data to “…better understand the challenges faced by business owners and identify options to address their commercial insurance needs” according to Sharon Fernandez, President of Business Insurance for Farmers. For The Hartford, “Carpe Data provides an opportunity to integrate even more data elements into our underwriting system…This partnership aligns with The Hartford’s history of building the best quoting process and providing fast, accurate business intelligence to our agents,” says Head of Small Commercial Underwriting Practices, John Russo.  As leaders in the commercial insurance sector, both The Hartford and Farmers have tapped Carpe Data and our expertise in digital data and applied analysis to accomplish three primary goals: 

  • Identify business activity with a greater degree of specificity through advanced classifications;
  • Enhance automation throughout the insurance lifecycle by uncovering new risk characteristics for an array of business attributes and operations, and;
  • Add new dimensions of insight and segmentation through predictive scores and indexes.

Similar initiatives were already top-of-mind for most insurers before the COVID-19 crisis began, but the global economic slowdown and its consequent impact on the small business sector has mandated faster and more precise methods for data collection and interpretation. Let’s explore some of these methods. 

[Check out the Farmers press release here OR The Hartford press release here]

Integrating new data elements into pricing and underwriting strategies

To adapt to new challenges, small business insurers will need to accelerate automation initiatives to ensure that coverage can be provided quickly and accurately. Alternative data sources provide additional insight into the many activities a business may conduct with a greater degree of specificity and can be added to existing classification systems, pinpointing answers to known risk factors as well as harnessing emerging dimensions that can predict business performance and outcomes.

As businesses evolve with the world and its new set of demands, data gathered from dynamic sources will evolve with them to support emerging classes of activity. It will be crucial to integrate these new classes into your existing system quickly in order to provide the most accurate coverage with the best customer (and agent) experience possible.


Business monitoring is more crucial now than ever

Current events have made one thing abundantly clear; assessing risk at a single point in time is an antiquated notion that hurts insurers as much as their insureds. 

Here in Santa Barbara (which is home to one of the highest restaurants per capita in the country) local restaurateurs have been faced with a difficult choice: adapt to the changing times and offer full-time, contactless deliveries or shudder their doors forever. It is not likely that they reviewed this with their insurer beforehand, yet these changes present significant new risks. 

And it’s more than just delivery drivers– has the business altered or diversified their services in response to the pandemic? Have they closed altogether? 

By tapping into a veritable ocean of online data, the insurer can leverage the insured’s digital presence to gain insight into the business’s needs, providing opportunities for outreach or proactive coverage expansion as soon as the information becomes public. The true value of this data lies in the speed with which it can be discovered, and in uncertain economic times those reliant on traditional data sources for decision making will be far too late to make an impact. 

Of course it’s not as simple as “tapping into” that ocean of data– in their raw form, these sources are massive, unstructured, noisy, and biased. To leverage this data in a meaningful way, you’ll need help. 


Adaptive models built from fast, flexible data sources

The more things change the less relevant models built on point-in-time, D&B-style data become. Data sources that continuously update better reflect the undulating realities of small business today, allowing insurers to create new models that will adapt to changing circumstances. 

The dynamic nature of digital data not only awards your current predictive models greater flexibility, but it also uncovers previously unused patterns that add new dimensions to your current risk profiles. For example, Carpe Data is currently leveraging online factors such as customer ratings, visibility, and reputation to develop a model that identifies which small businesses are most likely to succeed through the COVID-19 crisis, allowing insurers to identify and competitively pursue like businesses. 


In a recent conversation with the head of small commercial underwriting for one of our largest clients he shared, “There’s been more change in the last month than we’ve seen in years, maybe ever. Monthly updates are now critical, whereas old tactics updated once a year.” The shifting is far from over and the ripples of economic uncertainty will continue, but even after this crisis has ended the small business landscape will continue to change as it always has. Insurers can remain agile and competitive with adaptable strategy, dynamic sources of data, and a willingness to embrace what comes next.