My previous post, based on a Digital Insurance article that said insurance companies are struggling to manage analytics teams, focused on the need for carriers to make back-office data a priority. Today I want to address a different component of that article - the centralized approach to data and why it doesn’t work for carriers.
The article talked about carriers that have set up centralized data teams, made up of analytics experts from industries that have been seen as analytics leaders, including retail, financial services, and healthcare.
The big issue with this approach, at least from my perspective, is this centralized team has a lot of analytics experience, but no insurance experience. That experience is extremely important because to have a strong data analytics program, you need to be able to contextualize the data. People who have never worked in insurance typically don’t understand the industry and all its nuances well enough to contextualize this unique data. Oftentimes they don’t even know what they should be measuring. Broad, top-line data can be given, but you won’t get the type of deep data that can truly impact a business at all levels.
From my perspective, it’s difficult for a carrier to store, manage, and analyze all their data because much of the data lies outside the company. Carriers work with all types of vendors for different functions who are all collecting and managing their own data. That data is still relevant to the carrier, but can’t always be collected and stored in a centralized repository within the carrier’s IT environment.
Carriers should avoid the temptation of thinking that their internal data is all that matters and seek industry-wide data from the experts. A big benefit of working with external solution providers is the extensive insurance specific knowledge and critical data analytics they have beyond just a single carrier. In other words, in addition to your data, they also have the data of many other carriers to help you contextualize your performance across your market. If you’re collecting, managing, and analyzing your own back-office data to compare internal performance month to month, wouldn’t it be more valuable to know where you stand against your peers?
A carrier can set the data strategy for its company from a centralized data function, but to have the best analytics program possible, look to outside insurance data analytics experts to help you drive market competitiveness.