By Graham Newman, European Product Marketing Manager, FINEOS
Following on from my previous blog on the FINEOS Executive Briefing for the London Market at the ACORD offices in The London Underwriting Centre I would like to take some time to go through the content of my speech at that event. I spoke to the title: Meeting the challenges – where is technology going and can it make a difference in 2012 and beyond?
I wanted to place this talk of changing technologies into a broader context, for it is surely true in the annals of human evolution that very few, if any, societal changes owe their origins to only one source. This is not just a case of a small elite of modern-day Alan Turings all coming up with some grand technological advances and these, on their own, being the catalyst for wide-ranging changes. The developmental changes I am focusing on here result from a range of triggers, some more connected than others but all having an effect on how technology will be used in the next few years.
We are living in an age of great volatility. I’m sure everyone always thinks that their age is one of great volatility and most think that that volatility represents unwelcome change, but I think we can make a case for today’s world being particularly unstable. There is social and political unrest sweeping the western industrialised nations, driven by economic changes brought about by the banking crisis and the political responses to it; there are environmental problems, some hinging on more frequent and unpredictable extreme weather conditions, all leading to economic volatility and uncertainty and most putting much greater pressure on the commercial claims world.
The development of technology is itself disruptive and that development is moving rapidly ahead. We are experiencing unprecedented growth and rapid expansion of the digital world – digital interactions, decision making, commerce, government and business.
There has been a massive increase in the sheer quantity of data being produced by so much new digital activity. So much that it has given rise to the imaginatively named term “Big Data”. The burgeoning volume of new data being produced – much of it quite probably of questionable benefit – is giving rise to literally trillions of bytes of new information.
McKinsey defines Big Data as being datasets that are so large they are quite simply beyond the capability of traditional applications and legacy systems to process. Some examples:
$600 – buys a disk drive that can store all of the world’s recorded music.
5 billion mobile phones were in use in 2010.
In the month of April 2011 alone the US Library of Congress collected 235 terabytes of additional data.
So, can it all be made useful? Is it valuable? Actually, yes, it’s immensely valuable.
McKinsey estimates that the potential value to US health care of all this Big Data is $300 billion, which is more than double the total annual health care spending in Spain. It puts the potential value to Europe’s public sector administration at €250 billion – more than the GDP of Greece. It also sees a potential 60% increase in retailers’ operating margins as being possible with judicious use of Big Data.
New technology is adopted in ever more rapid ways. It took 38 years for 50 million users to own a radio. Television needed only 13 years to gain 50 million owners. In Britain the take up was given a massive boost by the televising of Queen Elizabeth’s coronation in 1953, one early example of how desirable content can drive take-up. The Internet spread to 50 million in only four years; the iPod beat it by just one year. Facebook had marked its place in the hearts of 50 million individuals in just two years and the ubiquitous Smartphones needed a mere 12 months.
(Source: UN Millennium Report).
Ovum predicts that we will add another 424 million smartphones to the total in 2012 alone, and another 84 million tablets will add to the technology clutter
It is critical to remember that each of these devices is a platform for claims business interaction. All of these new devices can – and will – be used for insurance business.
We can see that the rapid adoption of new technologies – and therefore new – radically new – ways of doing things is driven by consumer behaviours as it is Consumerism that leads the way and commerce that will follow. The digital world will fundamentally influence the way insurance is sold, managed and claimed.
Under the Microscope
This is a huge topic and there are quite literally hundreds of aspects that we could investigate of how advances in technology are being – and may be – used to make a difference to insurance in general and claims in particular, but that would take too long and also contribute to the growing store of Big Data. So, to illuminate just some of the benefits I narrowed it down and put two under the microscope – Access, building collaboration to draw benefit from evolving behaviours; and Analysis, driving value from Big Data.
We’ll start with Analysis.
The trend and indeed recommendation, from analysts such as OVUM / Datamonitor as well as from FINEOS, is to embed analytics into claims management to model and estimate for all aspects of developing processes, and areas where extra information can enhance decision making. This will be for such factors as estimating maximum loss, expenses, timeframes and associated resources required for insurance claims.
It is also for fine-tuning the operational processes. By using the richness of the data that comes in the door with the claim – and its subsequent updates and revisions – claims systems can make multiple decisions and move claims through the system with little or no human intervention. Where it is necessary it can deliver the claim folder – with all its associated and relevant information – to the appropriate claims handler. This goes beyond simple workflow – this is true Case Management. It can be used to control processes, manage cases and ensure compliance.
The objective of suitable embedded analytics is to produce interactive visualisations. This is about making the data dance, turning data into information through interactive visualisation and animation of data. Spreadsheets and reports may inform but they take time and when the underlying data changes faster than you can absorb it they don’t provide the “Ah! Ha!” moment of understanding.
This is a field that has so far made little impact in claims processing but has much to offer. Predictive analytics for geospatial capabilities are able to create geographic visualisations of impending impacts of environmental changes – such as floods, earthquakes etc.
Fraud has long been an area in which insurance companies have invested but in terms of harnessing the power of predictive analytics in this field there is still much to be achieved and significantly more value to be drawn from the judicious use of fraud analytics.
This is becoming the topic du jour in some areas of insurance and there has been some media interest in how this may affect personal car insurance, with “pay-how-you-drive” and so on and using it for special interest drivers such as those who rarely use their cars, and then just to go shopping, or young drivers to check that they drive only during daylight hours and then not go round corners too fast.
Specifically for insurance it has benefits for both rating and claims processing.
- Usage based premiums – refining the premium to relate to driver behaviour, when and where the car is used.
- Style driving penalties – having higher micro-rates for specific driving styles. This covers bad driving as well as just driving that attracts a higher risk. So it covers speeding, cornering too fast and coarse driving as well as driving during rush hours, not necessarily wrong but a higher risk, or driving in crowded city centres versus rural.
- It allows for matching micro-premium charges to risk based driving behaviours.
- Telematics devices can be configured to provide first notice of loss. They can detect a sudden stop, airbag deployed, even theft – vehicle moving when it’s supposed to be stopped for the night.
- They could detect doors being opened on trucks that should be locked up and can alert fleet managers.
- They can provide information early that can assist in early loss estimates.
- The information they acquire can be used in managing litigation and expenses.
- It may also be useful in defending claims from third parties and substantiating claims against third parties as it will contain irrefutable evidence of speed, position etc. at the time of impact.
In addition they have been shown to provide the right type of positive feedback that can improve driver behaviour, thereby reducing the incidence of claims.
The whole contributes to better rating, more competitive pricing and improved claims service.
That’s it for today’s update. I hope you are enjoying the blogs from the event last week! I would be delighted to hear any comments you might have.
I will conclude with one final update early next week.