Insurers have always appreciated the strategic importance of data and analytics to manage risk, conduct actuarial analyses and to detect fraudulent claims. The existence of advanced analytics is an exciting prospect, given the possibilities it now presents for the industry. But while they continue to evolve in their use of analytics, many are still searching for that right strategy to derive a competitive advantage from these capabilities.
Mr Kit Yamamoto, Regional Chief Financial Officer at Tokio Marine Asia illustrated a typical analytics journey for many insurers in the region – where the primary purpose was on managing risk.
“Tokio Marine started as a non-life insurer and managing natural catastrophe hazards was an important aspect, so our analytics journey started from a risk management standpoint looking at risk valuation and pricing.”
“But now it is evolving more into the marketing aspect and looking at customer information and so on,” he said.
Mr Caleb Ying, Head, Infrastructure & Operations, Information Management at NTUC Income Insurance Co-operative, said: “Analytics is used to help us better understand our customers’ needs and to reach out and serve them better.”
“We have formed a business analytics central committee, and marketing is a big component in there, looking at customer segmentation and their propensity to purchase. Every department can use analytics differently, for us, it’s mainly for data augmentation and creating a 360-degree view of the customer.”
Early on in the discussion, Mr Stuart Rose, Director of Global Insurance Practice at SAS, queried where the organisational accountability for analytics rested amongst insurers at the table. He later added this was an important consideration to make in the analytics journey.
“One of the things I see in successful analytical organisations is to have a central analytics unit. There can be a lot of conflict around analytics with certain departments having different priorities, so one needs to be able to look at the big picture and having that central organisational aspect of it is fundamental,” he said.
Dr Khoo Kah Siang, CEO at Great Eastern Life Assurance, agreed that defining the role of analytics within the organisational set-up would have a significant impact in steering one’s analytics journey.
“It’s an important point because if it’s placed under marketing, the analytics person will think about data from a marketing perspective and that will drive it in a certain direction.
“We have a centralised analytics team which is currently parked under marketing, so perhaps the mentality is one of marketing, but analytics can certainly be used for other things,” he added.
Application to business
Businesses today hardly suffer from a lack of data given the richness of information available, but knowing how to best leverage this data is the main challenge, said Mr Yap Sim Lim, Senior Vice President, Information & Communication Technology at MSIG Holdings (Asia).
“You may have the analytic tools but if the person does not know how to utilise it to provide insights then it will just remain a tool. Mining the data is important but fully leveraging this information is key – you need someone with the experience to see the information and explain it to decision-makers for them to see the value.”
Mr Nishit Majmudar, CEO of Aviva in Singapore, said his organisation has seen analytics improve its direct and telemarketing efforts, as well as understanding customer profitability.
“In terms of having a single view of the customer, we are trying to pull information relating to underwriting and health so we have more information of the customer when we do direct marketing. At some stage, we also want to pull information relating to health claims we’ve paid out so as to look at the lifetime value of the customer.
“The next challenge is how do we use analytics with intermediaries to help improve productivity. It’s still early days but we’ve started to look at the data of FA firms and applied analytical tools to it,” he said.
The big picture
Mr Kenneth Koh, Senior Manager, CI, North Asia, SAS said the use of analytics has evolved greatly in Asia, allowing insurers to view the lifetime value of its customers as well as detecting claims fraud among others.
He added that insurers can also now combine online and offline data to get a better understanding of the customer.
“We are working with insurers on sentiment analysis, by trying to understand what customers are talking about on intermediaries’ Facebook. There are certain privacy acts in place and the agents must allow us to tap on their social media network so we can better understand what their friends say about certain products.
“It then gives us the ability in real time to position certain products suited to the customer’s sentiment and life stage,” he said.
While analytics can help improve profits, Mr Majmudar does not see it as the primary objective at Aviva.
“We’d like to see how analytics can contribute to the customer, distributor, the industry and even society at large – not just to increase sales. My view is that analytics should be used in a bigger holistic sense, so I’d want customer data to sell more but knowing his needs better so there is no mis-selling.”
Dr Khoo also echoed the value of analytics in creating a better customer experience.
“It’s not just to sell more but whether we can engage customers more appropriately knowing their preferences, so that they can do more with us eventually.”
Creative uses of data
On the whole, Dr Khoo felt that life companies can learn from their non-life counterparts when it comes to more creative sourcing and use of data.
“Life companies tend to do analytics on their own data whereas non-life companies have evolved a lot faster by looking at data from different sources and incorporating them into their analytics engine.
“There’s no reason why life companies can’t do the same, perhaps it could allow me to insure someone who is diabetic even though underwriting guidelines say no. It could also give us insights into lapsation patterns or intermediary fraud.”
“For example motor insurers look at the credit profile of customers as those with a good profile tend to have a better claims experience,” he added.
Perhaps if life companies were to incorporate analytics more into their risk management, then it could prompt a change in direction, said Mr Yamamoto.
“If analytics from the life side expand from just marketing to include underwriting, then usage of external data from life and non-life would start to converge,” he said.
While the amount of information available about insureds presents opportunities for insurance companies, the challenge would be in deciding which data is most applicable.
“The struggle for insurers will be how to deal with all this information. Many are to some degree drowning with the amount of information they currently have, so what would happen when more comes in? So it’s determining what is relevant and what isn’t,” said Mr Rose.
He added another challenge would be in retaining talent, given that actuarial and mathematics graduates are in demand in other industries which are now making use of analytics.
“How insurers make themselves attractive enough to those actuaries and data scientists is an interesting challenge. I think you’d need to set up a central team and make their job as varied as possible to retain them, and also show how analytics can benefit them as it makes it easier to gain insights than in the past.”