Providing coverage for small businesses just went from challenging to difficult. New challenges demand new data elements, sourced from emerging and alternative sources and refined using artificial intelligence and analysis. Businesses change, grow, and adapt, and a carrier that’s not keeping up can lose out on a great opportunity to fine-tune its book of business and practices.
This blog is based on “Using New Data to Out-select the Competition,” a webinar presented by Carpe Data’s Vice President of Product Robert Burns, as well as Tim LeCam, IT Strategist at EY Advisory Services, and John Russo, Head of SC UW Practices at The Hartford, for AM Best’s webinar series on July 15th, 2020. You can view a recording of the full presentation free here.
Why new data, and why now?
Over the past decade, insurance carriers have invested in upgrading and updating their systems, making it possible for them to now ingest these new external data sources. The Internet of Things (IoT) and smart objects have produced a wealth of data, and over 1,000 insuretechs are now refining it for carrier consumption. The confluence of the availability of data, infrastructure investment, and the growth of AI and machine learning has created a competitive advantage for the carriers able to act. And the benefits? New data sources can automate mundane tasks for underwriters, streamline systems, and enhance the customer experience.
Augmenting underwriting with speed and accuracy
In short, these new external data sources enable underwriters to answer questions that weren’t answerable before, and even questions they didn’t know to ask. Underwriters can access information easier with the new data sources available, and more quickly and with more accuracy—without having to ask the client. Once the data is synthesized, it gives a fuller picture of the business’ physical attributes, and also how the business performs, providing an indicator of risk.
Legacy systems? Not a problem.
It may not seem obvious, but insurance carriers are masters at process re-engineering, and recent investments in modernizing core platforms have made adopting new sources of external data simple enough. Still, older systems aren’t necessarily an obstacle to consuming alternative data sources. Most 3rd party data providers understand that legacy operations take time to change and offer various methods for data consumption.
Don’t boil the ocean
Adopting and implementing new data strategies is not as hard as it looks. Just make sure all strategies are grounded in business objectives and, most importantly, start small. “Don’t boil the ocean,” recommends Tim LeCam, IT Strategist at EY. Don’t attack the entire value chain, take it one piece at a time. “Commit to it, be agile, be successful, then build on that success.”
Questions (and answers!) from the webinar
How do you validate the data from a third-party provider as accurate?
John Russo of The Hartford had a ready answer—”When you go down the path with data, you can’t have an expectation of 100 percent accuracy.” Instead, determine the level of accuracy you’re comfortable with by using your current books of business as a benchmark. Dig down into the data and compare with your own information for validation. Ask the insuretechs and data companies questions you already know the answers to, based on current clients.
How do you use social media data respectfully and without bias?
First, companies need to understand what kind of social media they are looking at, and use those sources to help verify other data points and aggregate signals about the client. How it’s used is important—don’t just use social media data to kick out a perceived risk or increase premiums, use it to ask questions of the client and help them understand risks.
How does one embark on a new data journey?
Identify the business need, and keep specific to that problem and how to apply data to it. Tim LeCam emphasizes that the journey needs to inherently be holistic throughout the company, and the right involvement from the right parts of the organization is critical to success.