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Data’s Sweet Spots

Leveraging Data from Trusted Partners to Enhance Insurance Processes

Susan Williams    |    Insurance

In late 2015, Novarica, an insurance research and consulting company, reported that 7 in 10 Property and Casualty insurers are "planning major enhancements or replacements to their business intelligence/analytics capabilities.” Integrating third-party data into the insurance workflow is a key aspect of this trend. In a report released in May of 2016, the company also noted the aging of core systems – with the average policy administration system platform age at 19 years old and many of them at over 30 years old – and the impact this has on carriers’ flexibility and speed to market.

In the insurance marketplace more data is available from multiple sources than ever before. This has led to optimal conditions for data-driven strategies ranging from straight-through processing, by-peril rating and “big data” analytics. The surge in core modernization along with the desire to feed multiple processes across the enterprise provides an opportunity to recognize and focus on integrating critical data elements into insurance workflows.

In the underwriting process it is imperative to have a system that provides the right data at the right time. As in manufacturing, just-in-time processing can reduce costs, improve quality and generate customer satisfaction and employee goodwill.

When an agent begins quoting a homeowners policy, the system can immediately use the property address to access the data needed to determine if the home is eligible for coverage. For example, third-party geospatial data can be queried to determine if the home is located in an area subject to wildfires and determine the unique risk score of the home based on the slope and aspect of the property, the home’s proximity to wild land and the history of burns in the area. If the risk score falls outside of the carrier’s risk tolerance parameters the system can notify the agent who can then immediately, and graciously, conclude the transaction without wasting further time or energy of either party.

Once the home has passed the automated selection criteria, additional data can be pulled in to supply the building characteristics of the home to ensure accurate calculation of the reconstruction cost—a prime factor in determining premium. The building characteristic data may include information that might not be readily known to the homebuyer or the agent. Prefilling that information directly into the quoting process eliminates the need to search other websites or hunt through a 15-page appraisal report to glean that one elusive data element such as square footage or the type of foundation the home sits on.

After the reconstruction cost has been determined and the coverage limits selected, it’s time to rate and calculate the premium. The critical data elements required for rating, be it roof age or roof cover, credit scores, hail risk scores, and other risk data, can all be pulled in to support the proper rating of the home. Straight-through processing (automated underwriting) in which the system looks at all of the rating criteria, computes the appropriate premium for the requested coverage and risk exposure, and then binds the policy on customer acceptance, has been the vision of P&C carriers for years. In addition, this focus on critical data elements and integration supports the ability to use granular by-peril rating where the unique building characteristics specific to each home become a factor in the rating equation. The wealth of data available to carriers coupled with robust APIs (Application Program Interfaces) to support accessing data at just the right place in the underwriting process are key to making this vision a reality.

But the vision needn’t end there. Once the homeowner’s policy is in place, the system can process additional demographic data to guide the agent in pivoting the homeowner to other products—auto, life, umbrella, college savings, etc.—that are appropriate to that specific individual or family. This same data that feeds the underwriting process can also be stored in the carrier’s data lake to feed and develop other internal processes across the enterprise.

At each step in the consumer engagement the necessary data is made available and consumable through the APIs which allows the carrier to reach out to trusted third-party data partners. The beauty of this model is that the partner/supplier can always provide the most current and complete data available without the carrier having to manage and continually update large stored data sets.

1“7 Hot Insurance BI Projects.” Insurance Networking News. SourceMedia, November 13, 2015. Web.

2 McIsaac, Rob. “COLI / BOLI Special Interest Group Meeting Previews New Research,” Novarica Blog, Novarica, March 4, 2016. Web

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