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The Data-Driven Underwriting Revolution: Don’t Get Left Behind!

 
August 2, 2016

Is your underwriting as precise as possible? Or will limitations in your underwriting prowess especially when it comes to leveraging the explosion of external and internal data — put you at a disadvantage against new, emerging non-insurance competitors?

These are critical questions, as underwriting has undergone enormous changes, especially in terms of the ability to collect, organize, and access a plethora of risk and customer information and then act on it. For example, the insurance industry is on the cusp of introducing technology that starts to think like a human mind and may soon be able to support underwriting, claims, risk engineering and decision support. Services-as-software platforms have emerged that can emulate how a human mind thinks through a problem and arrive at a particular answer or set of alternatives.

This is just one of the ways in which new data-related capabilities can transform insurance underwriting. Theres a lot more information about clients from an insurance standpoint than ever before. However, many insurers still struggle to understand what data they actually have in their possession. Theres an opportunity to manage data better, which means making sure you have a data strategy in place maximizing the data you have and making sure you use that data so that you get the most out of it.

Leverage third-party data proliferation
The proliferation of third-party data is revolutionizing underwriting. Half of the 58 respondents to a recent Novarica survey said that data collected by a third party to the insurance transaction has potential use in the underwriting process. Insurers have always used third-party data in underwriting and relied on external providers for information such as motor vehicle records and credit reports to inform underwriting decisions.

Whats different today is that there are now significantly more data types, due in part to the growth of social media and the ability to collect data about all of us who engage and share information willingly on platforms such as Facebook and LinkedIn. That data is now being utilized within the disclosures and agreements constraints people accept when they sign up for these accounts.

Some of this public information is available for purchase, and insurers can obtain significantly more information about clients and prospects than ever before. Data can also be monitored via social media, via technology to listen and pull out whats relevant. A commercial lines underwriter that caters to risks in the consumer products sector, for example, can monitor social media very specifically and gather product usage-related information on potential clients through LinkedIn, Facebook, or any social media platform. And when analytics is applied to this information, it can result in better understanding of customer sentiment towards the client, the types of discussions going on about the products and customer service a company provides, their reputation in the marketplace, and so on. With the realization that this is subjective data and anecdotal in the sense that it is based on people talking about an entity under evaluation, it can help paint a more holistic picture that you can use in your risk-decisioning processes.

Follow the leaders
This is similar to how digital leaders and potential competitors in other industries are taking advantage of the explosion of data. The amount of information they have and their ability to gain intelligent insights out of that information is advanced, as compared to what an insurance company typically has in place. Players such as Google, Amazon and Walmart can glean a lot of information on customers that insurers generally dont have, including what they buy, how they buy, and at what times of the year customers need certain things. These companies also get information about customers finances, since people can finance items through Amazon cards or other financial instruments they make available to customers.

But what if you could suggest, based on your knowledge of purchases that someone has made for their childs dorm room at college, better coverage through a new homeowners policy? This capability for enhanced cross and up-selling, enabled by intelligent and prompt recognition, is feasible and can provide revenue opportunities unrealized with the current capabilities. The reality is that, while insurers surely have a good understanding of their client bases, and are getting better at implementing CRM-type systems to analyze data, its hard to be as nimble as companies such as Amazon, that are basically data warehouses on their own.

In my 35 years in the industry, I never have seen so much rapid change as is occurring now in underwriting. The challenge is to keep up with the pace of the changes that underwriting technology is undergoing. Get your data strategy in order, and consider the unconventional to take advantage of new capabilities.

Tom Rubenacker is the property casualty domain lead for Tata Consultancy Services (TCS) in North America. Mr. Rubenacker has 30 years of experience spanning business and technology consulting. He has extensive expertise in underwriting management and operations, rating and policy administration, customer service, and end user helpdesk operations. His consulting expertise spans strategic planning, process reengineering and modeling, IT portfolio assessment, IT blueprinting, project and change management, IT quality assurance, use case modeling, and business architecture.