THE FUTURE OF INSURANCE TECHNOLOGY CUSTOMER DATA AND ANALYTICS

Created by Insurance Post in association with Equinix

DATA MININGPOST is excited to present the second of two whitepapers in conjunction with Equinix on the future of insurance technology with a focus on Asia.

The first whitepaper, The Future of Insurance Technology: IT Outsourcing and the Cloud, examined trends in the outsourcing of IT services, with a focus on use of the cloud in the region’s insurance industry. This document digs deeper into a related and increasingly critical area: analysis of customer data, and the privacy and security issues it raises.

Insurance companies are used to analysing data in a traditional manner from an actuarial perspective, with a view to assessing business risks or detecting fraud. A more recent and fast-rising trend is the use of customer analytics to generate business opportunities.

This could include using telematics in the motor insurance industry to assess driving behaviour or analysing customer health records to determine the best cover to market for a particular individual.

Insurers are not the fastest movers in customer analytics, but the savvier firms in Asia are developing their capabilities and making use of the cloud for this purpose. In an increasingly digital environment, it is critical companies keep up-to-speed. The paper is focused on insurers and brokers direct relationships with customers rather than areas such as modeling. We hope to research the reinsurance and wholesale markets at another time.

Still, there are significant issues around the electronic storage and transmission of customer data, most notably around privacy and security – and greater regulatory clarity is needed. Once these are resolved, widespread use of cloud-based analytics services seems inevitable.

This paper explores the challenges, trends and concerns emerging for the general insurance industry, with a particular focus on Asia. It is based on the findings of a survey of insurance industry participants in 2015 and on interviews with selected Asia-based executives, including insurance company executives, brokers and consultants.

Details of the breakdown of types of respondents to the survey, where they have operations and their headcounts appear in the appendix.

We hope you enjoy reading this paper.

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FOREWORD

Andrew TjaardstraEditor, Asia – POST

EXECUTIVE SUMMARYData is central to the insurance business – it is often described as the ‘lifeblood’ or ‘DNA’ of the industry. In a globalised, digital world where it is increasing in volume, velocity and variety, the need for speed, accuracy and storage is increasing apace.

Data segmentation, data analysis, system flexibility and data control are at the forefront of insurance directors’ thinking as they seek to better understand their customers and harness intelligence to gain a competitive advantage. As we move further into the digital, cross-platform age, each company is going on a journey to discover the opportunities and limitations of the new accessible data environment.

The key findings from the whitepaper include:

• Insurance companies in Asia are behind the curve when it comes to customer analytics and use of the cloud in this area.

• Insurers are not using real-time data analytics widely in the region, but are increasingly considering how they will do so.

• Customer relationship management is the area where real-time, cloud-based analytics are used most.

• Around a third of survey respondents are using real-time technology and analytics to analyse data from mobile devices, and a further 25% are planning to do so.

• Customer analytics is further highlighting the critical importance of data privacy, security and sovereignty, and insurers are awaiting greater regulatory clarity in these areas.

• Half of the survey respondents say they have sufficient expertise when it comes to data analytics. However insurers in Asia say it is hard to find talent.

• Half of the survey respondents say they are using third-party data centres. That proportion is set to rise once there is greater regulatory certainty around data security and sovereignty.

INTRODUCTION

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THE RISE OF CUSTOMER ANALYTICS

SECTION ONE

“Insurance firms need to become more active in customer analytics, and if they don’t, their relevance will be threatened.” David Piesse, managing director Asia-Pacific, Ultimate Risk Solutions

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THE RISE OF CUSTOMER ANALYTICS

TAKE-UP OF CUSTOMER DATA ANALYTICSAs customers increasingly research and buy insurance via the internet, rather than through physical channels, it is becoming easier to analyse their personal data and buying behaviour. Enhanced systems, broadband connectivity and big data are helping.

Many insurance firms have already been carrying out actuarial analytics for risk-based capital modeling. Insurance companies in Asia have been slow to use data analytics, especially in real time, according to David Piesse, managing director at Ultimate Risk Solutions Asia-Pacific, a financial modeling company based in Hong Kong

Insurance firms need to become more active in customer analytics, and “if they don’t, their relevance will be threatened”, notes Piesse. “Non-financial players have been doing this customer predictive analytics for years and have access to the data.”

Positively momentum is building, with a growing number of insurers and insurance brokers raising their game.

Canada’s Manulife is increasing its customer analytics, most notably through cloud-based customer relationship management tool Salesforce.

The firm’s initiatives include predictive buying behaviour profiling, pricing valuation/claims experience studies, product profitability analysis, business performance management and operations service management performance assessment.

“This has enabled us to attain cutting-edge, real-time insights into customer/adviser usage patterns, marketing campaign effectiveness and social media traffic performance,” says John Brisco, chief information officer and chief operations officer at Manulife Asia.

IAG has created a Digital Lab to become more customer-led and data driven and is hoping to “redefine its core businesses” around its customers.

Agency analytics is also common in Asia; it helps insurance firms assess the productivity of their agents.

Probably the biggest obstacle for uptake of analytics is the lack of standardised data, says a Hong Kong-based senior executive at a big insurer. “It’s difficult to synchronise everything onto a single platform to simplify the analysis.”

REAL-TIME ANALYTICSLiberty Insurance Singapore is not yet employing real-time analytics, but is likely to make substantial use of such systems once certain security and regulatory concerns are dealt with (see Section Three, page 11). Its US-based parent company, Liberty Mutual, is already using real-time analytics for some applications.

According to our survey, real-time analytics is far more likely to be used for claims, social media and sales than underwriting, risk modeling and risk management. (see figure 1)

Insurers are encouraging customers to register their claims as quickly as possible via either mobile apps, phone calls or online. In addition insurers, with the right tools, can use analytics to assess yesterday’s claims and any unusual spikes that may prove fraudulent.

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Insurers and brokers have begun monitoring customer feedback on social media and responding almost immediately to criticism and requests.

There are expectations insurers will attempt to react faster to events for underwriting and risk modeling.

As general insurance sales increase in Asia-Pacific, companies are increasingly trying to leverage more complete and faster information. Greater computing power and analytical software tools are providing more intuitive, real-time analysis for underwriters.

Sensor based technologies will help with real-time pricing and policy modifications. The possibilities are huge but the industry is still at the early stages of innovation.

Climate change is becoming increasingly important with reinsurers investing in scientists to try and help feed their underwriting expertise.

THE RISE OF CUSTOMER ANALYTICS

FIGURE 1. ARE YOU USING ‘TRADITIONAL’ ANALYTICS AND OR REAL-TIME ANALYTICS (AND RELATED TECHNOLOGIES) FOR:

0

20

40

60

80

100

Risk m

anagement

Risk m

odeling

Underwriti

ngSa

les

Socia

l media

Claim

s

■ Traditional■ Real time

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DATA IN THE CLOUD

SECTION TWO

“Solutions like Google Analytics have come on leaps and bounds since 2006.” Michael Lamb, CEO, Hong Kong broker CCW Global

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USE OF THE CLOUD FOR ANALYTICSThe majority of insurance firms in the survey haven’t implemented cloud-based analytics. This is expected to change given the convenience, cost savings and other business benefits that can be achieved.

As seen in the first whitepaper, IT Outsourcing and the Cloud, industry players are awaiting greater regulatory clarity on data privacy, security and sovereignty and about what can be placed in the cloud.

While there is some overlap, only around a third of respondents to the survey said they are using cloud services for analytics, while half are doing so for customer relationship management (CRM). (see figure 2)

However, some are already employing cloud services such as Salesforce.

Manulife uses Salesforce to allow it to obtain real-time information on customer and adviser usage patterns, marketing campaign effectiveness and social media traffic performance. The firm is also investing in more data infrastructure via cloud solutions to be able to do the ‘big data’ use-case analysis that is needed when combining multiple sets of internal and external data.

DATA IN THE CLOUD

FIGURE 2. ARE YOU USING CLOUD SERVICES IN ANY OF THE BELOW CATEGORIES?

0

20

40

60

80

100

Custom

er rela

tionsh

ip

managem

ent

New busin

ess /

sales

Analytics &

modelin

g

Claim

s

Reporti

ng

Polic

y adm

inistra

tion

■ Not using or considering ■ Using■ Considering

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DATA IN THE CLOUD

CLOUD COST SAVINGS A clear driver of cloud service uptake is their cost-effectiveness, and analytics is one area where insurers can make particularly substantial savings.

Licence fees for data analytics software can be high, while free tools such as Google Analytics have progressed markedly in the past few years. Hong Kong-based insurance broker CCW Global is certainly a convert.

“Solutions like Google Analytics have come on leaps and bounds since 2006,” says Michael Lamb, Hong Kong broker CCW Global’s CEO. “You can see what a client is doing even as they go through your system. There’s no wasting your time or theirs; you’re ready to have a conversation in five minutes about the products they might be looking for.”

Moreover, insurance companies are likely to make more use of freely available open-source analytics applications, whereby anyone can access and make improvements to the tools.

MOBILE DATA ANALYTICS As recently as five years ago some in the digital industry questioned whether use of smartphones and other mobile devices would make a tangible difference to e-commerce. They are now widely seen as the way of the future.

Most industries are moving towards operating via mobile devices and the cloud, and the insurance industry is no different. Insurers recognise they must adapt to this reality and are increasingly providing mobile-based platforms to customers and assessing customer use of them.

Around one-third of respondents said they employ real-time technology and analytics using data from customers’ mobile devices. A further 25% said they have plans to. (see figure 3)

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FIGURE 3. ARE YOUR REAL-TIME TECHNOLOGIES AND ANALYTICS UTILISING DATA FROM CUSTOMERS’ MOBILE DEVICES?

■ Yes

■ No, but have plans to

■ No, and no plans

25%

32%43%

DATA IN THE CLOUD

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40% said they have no plans to use real-time analytics. Again, this appears a high number, given the potential benefits this technology can offer, notes James Maudslay, global head of insurance, Equinix.

Manulife is at the forefront of analysing data from mobile devices in Asia. It has launched a new capability in Japan that allows its agency sales force to gain real-time insight into product and customer performance via ipads and mobile applications.

“Looking longer-term, the real excitement in our analytics strategy will be to provide personalised analytics that are accessible anywhere and anytime to our customer base across Asia,” says Brisco.

He expects Manulife will ultimately be better able to interpret data from other sources such as wearable devices/clothing and social media.

DATA SECURITY

SECTION THREE

“In the past, data security has traditionally been an afterthought – now it needs to come first.” David Tam, chief information officer, Liberty Insurance Singapore

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TALENT SHORTAGEA major challenge for insurers in Asia when it comes to data analytics – perhaps the largest they face – is sourcing suitable talent to develop their capabilities.

Piesse of Ultimate Risk Solutions says the industry is short of a substantial number of people in Asia across all types of roles, particularly in technology functions such as data scientists, cyber security and mobile- and cloud-related services.

A growing number of firms, most notably the larger ones, have dedicated analytics staff in place, but are keen to boost their in-house expertise further. A common aim is to at least double the number of people focused on analytics in the next two to three years. Smaller firms have prioritised and feel more comfortable with their amount of talent.

Around 48% are looking to hire more or find talent very hard to find. Maudslay comments: “Everyone says: ‘We don’t have enough expertise, we would like to hire more, but we can’t find the right people.’”

DATA SECURITY

FIGURE 4. DOES YOU BUSINESS HAVE SUFFICIENT TALENT IN DATA ANALYTICS?

■ Yes, about the right amount

■ We are hiring more

■ Talent is hard to find

31%

52%17%

12

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DATA PRIVACY AND SECURITYAs the volume of customer data being analysed grows and the cloud becomes more popular, so the focus is sharpening on data privacy and security. Insurance firms view this as a critical issue.

“In the past, data security has traditionally been an afterthought – now it needs to come first,” says David Tam, chief information officer at Liberty Insurance Singapore. “We need to be sure that the cloud providers have strong security standards, but they are not all very transparent about the models they use.”

Regulators in Asia have been tightening rules around data use and storage: regulators in Malaysia and Singapore have implemented new comprehensive European-style privacy laws; China has amended its consumer protection law to include data privacy principles; and South Korea has increased the size of financial penalties imposed.

The most popular method of improving data privacy among the survey’s respondents is to introduce greater internal controls (see figure 5); others are using or considering cloud and data security systems such as Guardtime.

DATA SECURITY

FIGURE 5. HOW ARE YOU LOOKING TO IMPROVE YOUR DATA PRIVACY PROCESSES?

0

5

10

15

20

25

30

35

40

45

50

Greate

r inte

rnal c

ontrols

Closer c

ollabora

tion w

ith p

artners

Exte

rnal c

onsulta

nts

Investm

ent in so

ftware

46.4%

39.3%

32.1% 32.1%

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DATA SECURITY

DATA SOVEREIGNTY AND DATA CENTRESThe focus on data sovereignty is rising as insurers’ businesses become increasingly international, leading to more cross-border transmission and storage of information.

Insurers are subject to both the laws of their home country and of the jurisdiction where the data is created and stored, and requirements vary from country to country.

Increasing use of third-party data centres and the cloud has further complicated this issue. Until regulators provide further clarity, many insurance firms are likely to hold off making major decisions about how and where to store data.

Reflecting this situation, by far the biggest concern it comes to data sovereignty is ‘changing rules and regulations’, followed by ‘location of data centres’. (see figure 6)

FIGURE 6. WHICH AREAS ARE OF MOST CONCERN REGARDING DATA SOVEREIGNTY?

0

10

20

30

40

50

60

70

80

Euro

pe

Asia-Pa

cific

US/Canada

South

Am

erica

Africa

78.4%

58.8%

31.4%

21.6% 19.6%

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Market players are optimistic that further clarity will emerge and regulations will support greater use of the cloud and data centres.

Insurance firms are aware that building and running data centres in-house require a huge amount of resource because they need frequent updating and upgrading. Meanwhile outsourcing changes the way a business operates and requires a cultural shift.

Half of the survey respondents are using third-party data centres (see figure 7), while only 7% say they plan to do so and another 43% say they have no plans on this front.

The latter figure seems surprising given that even the largest insurers recognise how costly and labour-intensive it is to host one’s own data centre, notes Equinix’s Maudslay.

There is a mix of philosophies and needs but Hong Kong-based pan-Asia giant AIA, with operations across 17 Asian markets, uses third parties for its data hosting. Over the past 18 months the firm has undergone a major procurement programme to more formally outsource its data centres and management of them.

FIGURE 7. ARE YOU USING A THIRD-PARTY DATA CENTRE?

■ No plans

■ Yes, in one country

■ Yes, in multiple countries

■ We have plans to

7%

21%

43%

29%

DATA SECURITY

THANKSThank you for reading the whitepaper. If you found this useful please see whitepaper The Future of Insurance Technology: IT Outsourcing and the Cloud. If you have any comments or questions please email andrew.tjaardstra@incisivemedia.com

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SURVEY RESPONDENTBREAKDOWN

APPENDIX

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1. HOW WOULD YOU BEST DESCRIBE THE BUSINESS YOU WORK FOR?

25%

6%

4%

12%

49%

4%

■ Insurer

■ Reinsurer

■ Broker

■ Loss adjuster

■ MGA

■ Other

2. HOW MANY PEOPLE ARE THERE IN YOUR BUSINESS?

23%

8%

8%

6%18%

18%

19%

■ 1 - 20

■ 21 - 100

■ 101 - 500

■ 501 - 1,000

■ 1,001 - 2,000

■ 2,001 - 5,000

■ 5,000+

3. WHERE DOES YOUR BUSINESS HAVE AN OFFICE OR OFFICES?

0

10

20

30

40

50

60

70

80

Euro

pe

Asia-Pa

cific

US/Canada

South

Am

erica

Africa

78.4%

58.8%

31.4%

21.6% 19.6%

APPENDIX

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John Briscochief information officer and chief operations officer, Manulife Asia

Mark Rittmayerchief financial officer, CSC Asia-Pacific

Andrew Ankerhead of infrastructure services and technology risk, AIA Group

David Piessemanaging director Asia-Pacific, Ultimate Risk Solutions

Henk ten Boschief information officer, Ageas Hong Kong

David Tamchief information officer, Liberty Insurance Singapore

CONTRIBUTORS

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