Analytics for Insurance

Content: Preface xi    Acknowledgements xiii    About the Author xv    CHAPTER 1 Introduction     The New    Real Business    1    1.1 On the Point of Transformation 2    1.1.1 Big Data Defined by Its Characteristics 3    1.1.2 The Hierarchy of Analytics, and how Value is Obtained from Data 6    1.1.3 Next Generation Analytics 7    1.1.4 Between the Data and the Analytics 9    1.2 Big Data and Analytics for All Insurers 10    1.2.1 Three Key Imperatives 10    1.2.2 The Role of Intermediaries 13    1.2.3 Geographical Perspectives 14    1.2.4 Analytics and the Internet of Things 15    1.2.5 Scale Benefit     or Size Disadvantage? 15    1.3 How Do Analytics Actually Work? 17    1.3.1 Business Intelligence 18    1.3.2 Predictive Analytics 20    1.3.3 Prescriptive Analytics 22    1.3.4 Cognitive Computing 23    Notes 24    CHAPTER 2 Analytics and the Office of Finance 25    2.1 The Challenges of Finance 26    2.2 Performance Management and Integrated Decision-making 27    2.3 Finance and Insurance 27    2.4 Reporting and Regulatory Disclosure 29    2.5 GAAP and IFRS 29    2.6 Mergers, Acquisitions, and Divestments 30    2.7 Transparency, Misrepresentation, The Securities Act and    SOX    31    2.8 Social Media and Financial Analytics 32    2.9 Sales Management and Distribution Channels 33    2.9.1 Agents and Producers 34    2.9.2 Distribution Management 35    Notes 36    CHAPTER 3 Managing Financial Risk across the Insurance Enterprise 37    3.1 Solvency II 37    3.2 Solvency II, Cloud Computing and Shared Services 40    3.3    Sweating the Assets    40    3.4 Solvency II and IFRS 41    3.5 The Changing Role of the CRO 42    3.6 CRO as the Customer Advocate 45    3.7 Analytics and the Challenge of Unpredictability 45    3.8 The Importance of Reinsurance 46    3.9 Risk Adjusted Decision-Making 46    Notes 49    CHAPTER 4 Underwriting 51    4.1 Underwriting and Big Data 52    4.2 Underwriting for Specialist Lines 54    4.3 Telematics and User-Based Insurance as an Underwriting Tool 55    4.4 Underwriting for Fraud Avoidance 56    4.5 Analytics and Building Information Management (BIM) 57    Notes 58    CHAPTER 5 Claims and the    Moment of Truth    61    5.1    Indemnity    and the Contractual Entitlement 61    5.2 Claims Fraud 62    5.2.1 Opportunistic Fraud 63    5.2.2 Organized Fraud 64    5.3 Property Repairs and Supply Chain Management 66    5.4 Auto Repairs 71    5.5 Transforming the Handling of Complex Domestic Claims 73    5.5.1 The Digital Investigator 73    5.5.2 Potential Changes in the Claims Process 75    5.5.3 Reinvention of the Supplier Ecosystem 76    5.6 Levels of Inspection 77    5.6.1 Reserving 78    5.6.2 Business Interruption 79    5.6.3 Subrogation 80    5.7 Motor Assessing and Loss Adjusting 81    5.7.1 Motor Assessing 82    5.7.2 Loss Adjusting 83    5.7.3 Property Claims Networks 84    5.7.4 Adjustment of Cybersecurity Claims 87    5.7.5 The Demographic Time Bomb in Adjusting 87    Notes 88    CHAPTER 6 Analytics and Marketing 91    6.1 Customer Acquisition and Retention 93    6.2 Social Media Analytics 96    6.3 Demography and How Population Matters 97    6.4 Segmentation 98    6.5 Promotion Strategy 100    6.6 Branding and Pricing 100    6.7 Pricing Optimization 101    6.8 The Impact of Service Delivery on Marketing Success 102    6.9 Agile Development of New Products 103    6.10 The Challenge of    Agility    104    6.11 Agile vs Greater Risk? 105    6.12 The Digital Customer, Multi- and Omni-Channel 105    6.13 The Importance of the Claims Service in Marketing 106    Notes 107    CHAPTER 7 Property Insurance 109    7.1 Flood 109    7.1.1 Predicting the Cost and Likelihood of Flood Damage 110    7.1.2 Analytics and the Drying Process 111    7.2 Fire 112    7.2.1 Predicting Fraud in Fire Claims 113    7.3 Subsidence 115    7.3.1 Prediction of Subsidence 116    7.4 Hail 119    7.4.1 Prediction of Hail Storms 120    7.5 Hurricane 121    7.5.1 Prediction of Hurricane Damage 121    7.6 Terrorism 122    7.6.1 Predicting Terrorism Damage 123    7.7 Claims Process and the    Digital Customer    124    Notes 125    CHAPTER 8 Liability Insurance and Analytics 127    8.1 Employers    Liability and Workers Compensation 127    8.1.1 Fraud in Workers Compensation Claims 128    8.1.2 Employers    Liability Cover 130    8.1.3 Effective Triaging of EL Claims 130    8.2 Public Liability 131    8.3 Product Liability 132    8.4 Directors and Officers Liability 133    Notes 134    CHAPTER 9 Life and Pensions 135    9.1 How Life Insurance Differs from General Insurance 136    9.2 Basis of Life Insurance 137    9.3 Issues of Mortality 138    9.4 The Role of Big Data in Mortality Rates 139    9.5 Purchasing Life Insurance in a Volatile Economy 140    9.6 How Life Insurers Can Engage with the Young 141    9.7 Life and Pensions for the Older Demographic 142    9.8 Life and Pension Benefits in the Digital Era 143    9.9 Life Insurance and Bancassurers 145    Notes 147    CHAPTER 10 The Importance of Location 149    10.1 Location Analytics 149    10.1.1 The New Role of the Geo-Location Expert 149    10.1.2 Sharing Location Information 150    10.1.3 Geocoding 150    10.1.4 Location Analytics in Fraud Investigation 151    10.1.5 Location Analytics in Terrorism Risk 152    10.1.6 Location Analytics and Flooding 152    10.1.7 Location Analytics, Cargo and Theft 154    10.2 Telematics and User-Based Insurance (   UBI   ) 155    10.2.1 History of Telematics 155    10.2.2 Telematics in Fraud Detection 157    10.2.3 What is the Impact on Motor Insurers? 157    10.2.4 Telematics and Vehicle Dashboard Design 158    10.2.5 Telematics and Regulation 159    10.2.6 Telematics     More than Technology 160    10.2.7 User-Based Insurance in Other Areas 161    10.2.8 Telematics in Commercial Insurances 162    Notes 164    CHAPTER 11 Analytics and Insurance People 167    11.1 Talent Management 167    11.1.1 The Need for New Competences 168    11.1.2 Essential Qualities and Capabilities 169    11.2 Talent, Employment and the Future of Insurance 173    11.2.1 Talent Analytics and the Challenge for Human Resources 173    11.3 Learning and Knowledge Transfer 174    11.3.1 Reading Materials 175    11.3.2 Formal Qualifications and Structured Learning 175    11.3.3 Face-to-Face Training 176    11.3.4 Social Media and Technology 177    11.4 Leadership and Insurance Analytics 178    11.4.1 Knowledge and Power 179    11.4.2 Leadership and Influence 179    11.4.3 Analytics and the Impact on Employees 181    11.4.4 Understanding Employee Resistance 182    Notes 184    CHAPTER 12 Implementation 185    12.1 Culture and Organization 188    12.1.1 Communication and Evangelism 192    12.1.2 Stakeholders    Vision of the Future 193    12.2 Creating a Strategy 193    12.2.1 Program Sponsorship 194    12.2.2 Building a Project Program 195    12.2.3 Stakeholder Management 197    12.2.4 Recognizing Analytics as a Tool of Empowerment 198    12.2.5 Creation of Open and Trusting Relationships 199    12.2.6 Developing a Roadmap 200    12.2.7 Implementation Flowcharts 202    12.3 Managing the Data 202    12.3.1 Master Data Management 203    12.3.2 Data Governance 203    12.3.3 Data Quality 204    12.3.4 Data Standardization 204    12.3.5 Storing and Managing Data 205    12.3.6 Security 207    12.4 Tooling and Skillsets 207    12.4.1 Certification and Qualifications 208    12.4.2 Competences 208    Notes 209    CHAPTER 13 Visions of the Future? 211    13.1 Auto 2025 211    13.2 The Digital Home in 2025        Property Telematics    214    13.3 Commercial Insurance     Analytically Transformed 218    13.4 Specialist Risks and Deeper Insight 220    13.5 2025: Transformation of the Life and Pensions Industry 221    13.6 Outsourcing and the Move Away from Non-Core Activities 223    13.7 The Rise of the Super Supplier 224    Notes 225    CHAPTER 14 Conclusions and Reflections 227    14.1 The Breadth of the Challenge 229    14.2 Final Thoughts 230    Notes 231    APPENDIX A Recommended Reading 233    APPENDIX B Data Summary of Expectancy of Reaching 100 235    APPENDIX C Implementation Flowcharts 239    APPENDIX D Suggested Insurance Websites 265    APPENDIX E Professional Insurance Organizations 267    Index 269