CEB Towergroup Insurance Webinar: Empower Underwriters with Data, Analytics and Secret Sauce

FINANCIAL SERVICES PRACTICE CEB TOWERGROUP INSURANCE

Empower Commercial Lines

Underwriters with Data,

Analytics, and “Secret Sauce”

September 24, 2014

Sponsored By

www.capgemini.com/hp/cira

www.hp.com/HAVEn

2 © 2014 CEB. All Rights Reserved.

CEB TOWERGROUP INSURANCE

Q&A Insurance Industry

Trends

Commercial Insurance Risk

Analytics (CIRA)

ROADMAP FOR THE PRESENTATION



Data and Analytics

Imperatives

Business Drivers

& Strategic

Responses

Commercial

Lines Drivers

Insurance Industry Trends


INSURANCE BUSINESS, STRATEGIC, AND TECHNOLOGY

PRIORITIES FOR 2014

Source: CEB Analysis

Business Drivers

• Evolving individual sales and service expectations

• Changing distributor business models

• Contentious scope and authority of insurance regulators

• Global dependence on volatile regional economies

• Intensified competition for critical skill sets

Strategic Responses

• Democratize the operationalization of the voice of the

customer

• Build a holistic enterprise-wide data strategy

• Rationalize IT portfolio to align to agile sourcing strategy

• Define standards for favoring agility over precision

• Redefine traditional insurance roles and structures

Top 10 Technology Initiatives for Insurance (2014) Life & Annuity and Property & Casualty

Create a horizontal

enterprise analytics

and models layer

Intermediate IT and

business cloud

utilization

Facilitate real-time

decisioning with

collaboration technology

Integrate consumer

and distributor portals

with back-end

technology

Leverage increasing

variety of core system

delivery options

Create a device-

agnostic mobile

infrastructure


Top Life & Annuity Technology Initiatives

for Insurance (2014)

Manufacture risk solutions with

integrated actuarial systems

Optimize the value of CRM across

diverse distribution channels

Top Property & Casualty Technology

Initiatives for Insurance (2014)

Integrate big data streams into

day-to-day operations

Expand telematics applications

beyond personal auto


Source: IIABA’s 2013 Best Practices Study

Agency Specialization

Percentage of Survey Respondents Reporting an Increase in Specialization, by Revenue

Group, 2010 and 2013

Distributor business

models are shifting and

show an increase in the

specialization of

independent agents and

brokers.


CHANGING DISTRIBUTOR BUSINESS MODELS

25%

44%

51%

56%

64%

68%

39%

56%

64%

72% 73%

80%

<$1.25 million $1.25–2.5 million $2.5–5 million $5–10 million $10–25 million >$25 million

2010 2013


n = 1,330

Source: PwC 15th and 16th Annual Global CEO Surveys

Q: How concerned are you about the availability of key skills as a business threat?

Percentage of Respondents, 2011 and 2012

A global scarcity of

skill sets drives

competition amongst

all global industries for

talent, and significantly

impacts insurers’

ability to attract and

retain top talent.


COMPETITION FOR CRITICAL SKILL SETS

INTENSIFIES

13%

10%

33%

31%

39%

41%

15%

17%

2011

2012

Not at all concerned Not very concerned

Somewhat concerned Extremely concerned


Source: Insurance Information Institute, Bloomberg, Aon Benfield

Economic Interdependence

US Impact of 2011 Thailand Floods, Illustrative

International financial

markets are now tightly

interconnected, and,

as economies fluctuate,

insurers of all sizes with

insured entities and

supply chain

dependencies spread

across the globe face a

significant risk

management challenge.


GLOBAL DEPENDENCE ON VOLATILE REGIONAL

ECONOMIES

Thailand Floods, 2011

Total Insured Loss

(USD millions):

$15,315

Impact on US Business:

Technology and Auto

Manufacturers & Suppliers

Hewlett Packard: 3.5%+ decline

in 2011 revenue

Ford: $80 million loss

Fluctuations Across Economies

Percent Change in GDP over Corresponding Period of Previous Year, Advanced and

Emerging & Developing Economies, 1998–2012

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Advanced Economies Emerging and Developing Countries

Source: IMF

Decrease in Thailand

manufacturing output

due to factory closures

Approximately 1,007

(billions THB) in economic

losses in manufacturing


TECHNOLOGY PRIORITIES FOR PROPERTY AND

CASUALTY INSURERS IN 2014

Source: CEB Analysis CEB TOWERGROUP INSURANCE

Top 10 Technology Initiatives for Insurance (2014) Life & Annuity and Property & Casualty

Create a horizontal

enterprise analytics

and models layer

Intermediate IT and

business cloud

utilization

Facilitate real-time

decisioning with

collaboration technology

Integrate consumer

and distributor portals

with back-end

technology

Leverage increasing

variety of core system

delivery options

Create a device-

agnostic mobile

infrastructure

Top Life & Annuity Technology Initiatives

for Insurance (2014)

Manufacture risk solutions with

integrated actuarial systems

Optimize the value of CRM across

diverse distribution channels

Top Property & Casualty Technology

Initiatives for Insurance (2014)

Integrate big data streams into

day-to-day operations

Expand telematics applications

beyond personal auto



Data and Analytics

Imperatives Business Drivers

Commercial

Lines Drivers



Combined ratios must

be lower in today’s

depressed

investment environment

to generate risk

appropriate ROEs.


A 100 COMBINED RATIO ISN’T WHAT IT ONCE WAS

Investment Impact on ROEs

Combined Ratio/ROE

*2008 -2014 figures are return on average surplus and exclude mortgage and financial guaranty insurers. 2014:Q1

combined ratio including M&FG insurers is 97.3; 2013 = 96.1; 2012 =103.2, 2011 = 108.1, ROAS = 3.5%.

Source: Insurance Information Institute

100.8

92.7

95.7

101.2

99.5 101.0

106.5

102.4

96.7 97.4

9.6%

12.7%

10.9%

4.3%

7.4% 7.9%

4.7%

6.2%

9.8%

8.2%

0%

2%

4%

6%

8%

10%

12%

14%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014:Q1

85

90

95

100

105

110

Combined Ratio ROE*


While the 1st quarter

2014 marked the 11th

consecutive quarter

with positive pricing,

making up for

significant prior

premium decreases will

not happen at current

rates.


AVERAGE COMMERCIAL RATE CHANGE

All Lines

1st Quarter 2008-1st Quarter 2014

Note: CIAB data cited here are based on a survey. Rate changes earned by individual insurers can and do vary,

potentially substantially


-13

.5%

-12

.9%

-11

.0%

-6.4

%

-5.1

%

-4.9

%

-5.8

%

-5.6

%

-5.3

%

-6.4

%

-5.2

%

-5.4

% -2

.9%

-0.1

%

0.9

% 2.7

%

4.4

%

4.3

%

3.9

%

5.0

%

5.2

%

4.3

%

3.4

%

2.1

%

1.5

%

-16%

-11%

-6%

-1%

4%

9%

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14


Cyber and reputational challenges are the most significant movers in this year’s Risk Barometer rankings, and cyber crime moved into the top 10 global business risks for the first time.


TOP 10 GLOBAL RISKS FOR 2014 ARE COMPLEX

Types of Global Risks

Rank, 2014


10%

10%

12%

14%

15%

19%

21%

24%

33%

43%

Quality deficiencies, serial defects

Theft, fraud, corruption

Cyber crime, IT failures, espionage

Intensified competition

Loss of reputation or brand value (e.g. from socialmedia)

Market stagnation or decline

Changes in legislation and regulation

Fire, explosion

Natural catastrophes

Business interruption, supply chain risk



Data and

Analytics

Imperatives

Business Drivers Commercial

Lines Drivers


Poll Question 1

To which business areas is your organization

currently applying big data?

1. Pricing and Underwriting

2. Risk

3. Fraud

4. Claims

5. Not Doing it yet


Few organizations translate increased investments in information management into better enterprise information.


DATA INITIATIVES ARE NOT YET USEFUL

The Information I Need to Do My Job is Available to Me

Percentage of Employees

N = 8,335 employees

Source: CEB 2012 Insight IQ Diagnostic

Information from Corporate Sources is in a Usable Format

Percentage of Employees

33%

67%

Yes

No

46%

54%

Yes

No



DATA INITIATIVES FACE LOW EXECUTION CONFIDENCE

The majority of insurers

lack confidence in

analytic capabilities, and

do not have the tools

necessary to assess

analytic needs across

their organization.

Insurers Lack Adequate Means of Determining the Data Tools, Capabilities,

and Quality Needs of Staff

Percentage of Respondents That Do Not Engage in Each Activity

84%

73% 73%

76%

80%

77% 79%

By linkingemployee

informationneeds tostrategicdecisions

By derivingemployee

informationneeds from

strategic goalsor targets

Byestablishingemployee

informationneeds basedon workflowprocesses

By gatheringmarket or

industry trends

By askingemployees via

survey

By engagingemployees viafocus groups

By trackinginformation

requests fromemployees

n=198

Source: CEB Financial Services Technology Survey, 2013-2014

Insurers Lack Confidence in their Company’s Ability to Execute Data-Related

Activities

Percentage of Respondents Reporting Little, No, or Neutral Confidence

58% 66% 60% 55%

Data integration Data visualization Data dissemination Data analysis

n=257


BIGGER DATA, BIGGER NOISE

As “big data” gets

bigger, it becomes

harder, not easier, for

employees to extract

truly valuable insight

from it.

Source: Taleb, Nassim, “Noise and Signal—Nassim Taleb,” Farham Street Blog, 29 May 2012,

http://www.farhamstreetblog.com/2012/05/noise-and-signal-nassim-taleb/.

Yearly

Data

Low

Low

High

Daily

Data

Quarterly Data

Hourly

Data

Minute-

Wise Data

Data Big Data

Volume of

Data/Frequency of Data

Observations

Signal to

Noise Ratio



INTEGRATE BIG DATA STREAMS INTO DAY-TO-DAY OPERATIONS

Insurers must integrate

big data streams into

core functions and

systems.


Big Data Stream

Core Function and System Integration, 2014

Source: CEB analysis

Underwriter Notes

Medical Reports

E-mail

Telematics

Adjuster Notes

Photos

Social Media

Policy Data

Video

Data Types and Sources (Example)

Big

Da

ta

Str

ea

m

Marketing Contact Center

Underwriting ECM Claims

Big

Da

ta S

tre

am

Marketing

Prior Years 2014


Source: CEB FSI Technology Survey, 2013–2014

Sixty percent of

insurance firms affirm

that underwriting

systems technology

provides high or very

high value to their

company.


VALUE OF UNDERWRITING SYSTEMS

Technology Value for Company

Value Drivers

1% 4%

13%

21%

60%

Very low or lowvalue

Somewhat lowvalue

Moderate value Somewhat highvalue

Very high or highvalue

8%

16%

37%

24%

6% 8%

Financial returnon investment

Functionality Processimprovement

Competitiveadvantage

Ongoing costsand

maintenance

Enhancement ofclient value


Thirty-two percent of


that underwriting

systems technology

poses moderate risk to

their company.


RISK OF UNDERWRITING SYSTEMS

Technology Risk for Company

Risk Drivers

11%

22%

32%

24%

10%

Very low risk Low risk Moderate risk High risk Very high risk

31%

19%

35%

15%

Integration complexity Risk of catastrophicfailure

Information security risk Dependence onspecialized resources




Forty percent of


that predictive analytics

technology provides

high or very high value

to their company.


VALUE OF PREDICTIVE ANALYTICS

Technology Value for Company

Value Drivers

0%

9%

27% 24%

40%

Very low or lowvalue

Somewhat lowvalue

Moderate value Somewhat highvalue

Very high or highvalue

26%

10%

18%

38%

8%

0%

Financial returnon investment

Functionality Processimprovement

Competitiveadvantage

Ongoing costsand

maintenance

Enhancement ofclient value


Thirty-nine percent of


that predictive analytics

technology poses

moderate risk to their

company.


RISK OF PREDICTIVE ANALYTICS

Technology Risk for Company

Risk Drivers

2%

26%

39%

26%

7%

Very low risk Low risk Moderate risk High risk Very high risk

37%

20% 18%

24%

Integration complexity Risk of catastrophicfailure

Information security risk Dependence onspecialized resources



Agent and broker specialization requires real time decisioning and

aggregated risk information so that insurers can win new business in a

highly competitive commercial lines space.

A significant underwriter skill gap is looming, and data and analytics can

alleviate serious negative outcomes.

Changing commercial lines financial metrics means insurers must find

new insights for pricing and product innovation.

Complex global supply chain risk can only be managed with integrated

internal and external data.

Integration complexity is the greatest technology risk for analytics and

underwriting system adoption which can be mitigated by partnering with

technology providers with proven capabilities in this area.

TAKE-AWAYS

CEB TowerGroup Insurance



Q&A Insurance

Industry Trends

Commercial

Insurance Risk

Analytics

(CIRA)


© Copyright 2014 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice.

“60% of insurance firms affirm that underwriting

systems technology provides high or very high value

to their company1.”

Commercial Insurance Risk Analytics:

Harnessing Big Data for Underwriting Efficiencies

Source: 1 CEB FSI Technology Survey, 2013–2014

2 Ordnance Survey “ The big data rush: how data analytics can yield underwriting gold”.

Commercial Insurance Risk Analytics:

Harnessing Big Data for Underwriting Efficiencies

“86% Insurers agree that analyzing multiple-

source data together, rather than separately, is

crucial to making accurate predictions2.”


A wealth of data exists inside and outside the organization that could improve risk assessment Geographic and Geo-Spatial

Is the facility located in a site prone to natural disasters?

What is the proximity to Points of Interest?

Political Is the facility located in a region of political

stability/instability?

Economic Is the facility located in a high, middle, or low

economic area?

Crime Is the facility located in a high crime area?

Risk Density What are the nearby risk factors?

Customer Personal details, claims history, other policies ?

Claims How many claims have been made in this area ?


At what level is your organization currently leveraging

external real time data along with internal data in your

underwriting processes?

Select the applicable option

Poll Question 2

1. We have an analytics solution implemented for integrating and

analyzing external and internal data

2. We do not have any solution implemented yet but we are in

process of evaluating various option

3. We are manually pulling data from external sources

4. We are not leveraging external data


The challenge is to integrate large volumes of varied data and make it accessible

How do I separate the

data I need from the vast

data that exists?

How and where can I

access the data I need?

How do I identify new

data sources to mine for

relevant information? How do I analyze data

in multiple formats

from disparate

sources?

Business impact

Delays and inefficiencies in

collation of data required for

informed decision-making

Inability to treat risks

individually and assess

accurately

Inability to use data proactively

and lack of predictive

capabilities

=

“The majority of insurers lack confidence in their company’s ability to execute

data integration , visualization , dissemination, and analytic capabilities1.”

Source: 1 CEB Research


Commercial Insurance Risk Analytics (CIRA) Unprecedented access to information on individual risk factors for a more informed, faster risk assessment

Data Integration,

Analytics, ETL

and data store

HP

HAVEn

Structured and unstructured

data sources

Political

Economic

Crime

Risk Density

Customer

Claims

CIRA Dashboard

Geo-Spatial

Integration of Multiple data sources for

real-time decision making

A “one-stop shop” for collecting, synthesizing, and analyzing risk data utilizing powerful

analytics, database management and a unified framework for data integration and

presentation

Granular Risk Data for increased accuracy


CIRA Dashboard- “Plug and play” capabilities display risk data exactly how you want it

• Finely-grained data

from multiple external

sources, integrated with

the insurer’s own data

• Dashboard provides

data visualization and

full drill-down

capabilities into the

underlying data

With Rapid Data Visualization capabilities, CIRA brings the right data in the right format,

customized for underwriters and providing for comprehensive decision support.

© Copyright 2014 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. 31

HAVEn

HP Solutions

HAVEn, the HP platform for Big

Data.

Sources:

* McKinsey 2009 data – 2011 “Big data: The next frontier for innovation, competition, and productivity”

** Gartner: Actionable Analytics Will Be Driven by Mobile, Social and Big Data Forces in 2013 and Beyond. Published: 25 January 2013 ID:

G0024716.

*** Gartner: The Information of Things: Why Big Data Will Drive the Value in the Internet of Things Published: 17 April 2013 ID: G00249066.

14.6 PB*

average stored

data per

company >1,000

employees of top

5 industries

Volume

100M**

business events

per second

Variety Velocity

1TB***

amount of data

created by an

industrial

machine per

hour

Big Data’s Big Bang

More and more data to be managed

Big Data Cloud Mobility Security

HP – The New Style of IT

© Copyright 2014 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. 32

100% of your data 1000x faster answers

1.2 month ROI *

1,000,000+ machine events per second

30x

More data per server

700+ connectors

* Source: Forrester Consulting, April 2013

Big Data Cloud Mobility Security

H A V E n

Hadoop/

HDFS

Autonom

y IDOL

Vertica Enterprise

Security

nApps

Catalog massive

volumes of

distributed

data

Process and index

all information

Analyze at

extreme scale in

real-time

Collect & unify

machine data with

ArcSight Logger

Powering HP

Software + your

apps

Social

media

Video Audio Email Texts Mobile Transaction

al data

Documents IT/OT Search

engine

Images

HP HAVEn – Making Sense of the Noise


CIRA empowers underwriters to assess risk exposure accurately and as a result improves…

Operational

Efficiency

Claims Cost

Reduction

Risk

Management

Cost

Management

Customer

Experience

CIRA

Platform

Assessment at individual

policy basis increases

accuracy

Unified

Information resulting in

increased efficiencies

and productivity

Identification of

regions with higher

risks optimizes

exposure and

provides opportunities

for claims cost

reduction

Increased

profitability with

lower loss ratios

and ability to price

the risk premiums

more accurately

Ability to offer

attractive terms for

lower risk

customers


More Information

Capgemini Insurance web:

www.capgemini.com/HP/CIRA

HP Capgemini Alliance web:

www.hp.com/go/capgemini

HP HAVEn:

www.hp.com/HAVEn

BriefingsDirect podcast

Solution Brief

Demo video

[email protected]

Contact us for a Demo presentation

to explore how CIRA solution

provides

value to your business:

http://www.capgemini.com/HP/CIRA

http://www.hp.com/go/capgemini

http://www.hp.com/HAVEn

mailto:[email protected]

CEB Towergroup Insurance Webinar: Empower Underwriters with Data, Analytics and Secret Sauce

Data & Analytics

Transcript of CEB Towergroup Insurance Webinar: Empower Underwriters with Data, Analytics and Secret Sauce