The digital transformation of the insurance industry has been underway for many years. Carriers have drastically improved their efficiency, speed and accuracy through the implementation of new technologies. Now the sector may be looking towards data analytics to make the latest leap.
The introduction of in-depth data analytics capabilities is empowering insurers in 2023 to perfect their value chain, by utilising data-driven decision making to streamline and improve the efficiency of their solutions.
This comes following years of grappling with vast amounts of unstructured data from diverse sources presents a formidable data management challenge, leaving insurance companies to often encounter the daunting task of extracting essential information from a multitude of PDF documents, encompassing insurance policies, claim forms, medical records, and much more.
The complexity of this lies in the varying formats and layouts of these PDFs. The repercussions of such manual processes are evident, leading to processing delays, escalated costs, and the ever-looming issue of human error, which can result in inaccuracies in insurance handling.
With this in mind, utilising data analytics solutions can offer insurers the prospect of boosting their profit margins dramatically, and in turn streamlining their entire process of operations.
Melanie Hayes, COO & co-founder of KYND, discussed the ways in which data analytics is changing the game for her firm, which focuses on cyber risk management. She said, “In response to the nature of modern risks, at KYND we’re witnessing insurance carriers increasingly adopting innovative data analytics to streamline business processes, improve efficiency, and offer more personalised services. This trend is particularly pronounced in the realm of cyber risk, where carriers are leveraging powerful, real-time, and actionable cyber risk intelligence like KYND’s that unveils an organisation’s internal and external threat landscape.
“Access to such information not only enables underwriters to accurately identify, evaluate, and price dynamic risks like cyber, but it also arms them with clear, contextual data to spot trends before they turn into claims, and consequently prioritise and support their risk mitigation strategies for their policyholders to strengthen their overall cyber resilience.”
This phenomenon is now widespread across the insurance realm too. For example, P&C insurers across the globe have found themselves loosening their purse strings and dipping into their pockets to bolster their own data analytics capabilities. This in turn advances their underwriting capabilities dramatically, allowing them to reap the rewards of this operational success.
These claims aren’t just perpetuated in print, or through whispers and back of the alley comments, Hayes asserted that the success of data analytics is firmly entrenched in cold, hard numbers. She said KYND has been successfully supporting the world’s most prominent insurance players globally in navigating today’s complex landscape with the help of advanced cyber analytics and risk modelling since 2018, and the results speak for themselves.
“One of KYND’s valued partners, a leading specialty insurer and reinsurer, witnessed a 30% reduction in ransomware claims frequency per policy and a 70% reduction by premium in 2022, all thanks to integrating KYND’s cyber risk data as part of their CyberTech suite. According to the latest data as of May 2023, the insurer does not anticipate any increase in ransomware claims in their book, despite the upward trend in ransomware incidents. This remarkable achievement underscores the importance of the above-mentioned forward-looking approach to cyber risk and is attributed to the effective portfolio exposure reduction made possible by leveraging KYND’s industry-leading risk intelligence and technology over the past couple of years,” she continued.
How to ward off the challenges of using data
As with any revelatory movement in the space, the push to incorporate data analytics on a widespread scale has many budding challenges for carriers looking to leverage the technology and bolster their own operations.
An influx of data brings with it heightened vulnerability to security breaches for insurers and their clients. In response to these concerns, numerous state and federal governments have taken action by introducing fresh data privacy laws and legislation, such as the Federal Gramm-Leach-Bliley Act (GLB), and the General Data Protection Regulation (GDPR). These measures aim to safeguard, not only data from the clutches of hackers, but also to shield consumers from the unauthorised sale and sharing of their personal information. Consequently, it becomes imperative for insurers to make compliance and data protection a paramount concern.
Eileen Potter, VP, Insurance Marketing – Smart Communications, the only provider of a cloud-based customer conversations management platform, explained how insurers can combat this challenge. Potter said, “In an era of ever-evolving technology and regulatory shifts, safeguarding customer data is crucial, especially within highly regulated industries like insurance. As insurers navigate the complex landscape of compliance changes, investing in technology like a digital form that will reduce errors and optimise data collection becomes crucial.
“Such a solution should not only collect customer data efficiently but also ensure its secure transfer to cloud storage platforms. Providers must adhere to the highest security standards including PCI DSS, SOC 1, and SOC 2, HIPAA, ISO/IEC, IRAP and FSQS, among others, to fortify data protection across multiple platforms and geographies,” she continued.
Potter’s words carry significant weight and warrant close consideration, as insurance groups represent prime targets for cyberattacks due to their extensive reservoirs of confidential policyholder data. Their products, policies, and pricing strategies are intricately interwoven with this invaluable data, enabling them to tailor offerings precisely to individual needs and budgets. It’s the promise of increased choices and reduced costs that entices consumers to willingly share their data.
In contrast to many other sectors that predominantly deal with sensitive financial data, insurers find themselves in possession of a trove of personal sensitive information that requires vigilant safeguarding.
For carriers, the aftermath of such cyber incidents often translates into business interruptions and significant financial outlays, impacting not only the insurance companies themselves but also policyholders and third parties.
The purloined data can be exploited for various criminal purposes, such as identity theft, with a view to reaping illicit financial gains.
Beyond the immediate financial repercussions, cyber incidents can inflict severe and enduring operational challenges on the targeted insurance conglomerates. Moreover, the damage to their reputation may be extensive, perhaps even irreparable.
Cyber risk specialist Hayes discussed how insurers can respond to this added pressure. “To enhance their operational efficiency and embrace digitalisation and what it has to offer, insurers often outsource various services in their processes. However, this also increases their exposure to cyber risks. To maintain compliance and mitigate potential threats, insurers must have visibility and oversight of data flow among their systems, services and applications. They also have to ensure that their chosen suppliers adhere to industry-specific regulations and meet high standards for data security and privacy.
“The very same cyber risk analytics that are leveraged to streamline portfolio risk management can also be utilised to assist carriers in identifying and addressing potential vulnerabilities within their third-party vendors, business partners, and service providers. By doing so, they can safely harness technology, data analytics, and automation to not only achieve operational efficiency but also cultivate customer trust,” said Hayes.
Looking ahead
Despite the obvious concerns regarding the safeguarding of data, the smart money is certainly on the widespread adoption of data analysis solutions across the insurance space. The benefits are simply too big, the potential reward simply too high. As ever in relation to data, due diligence will have to be at an all-time high when implementing this modern, transformative software.
Hayes concurred, with the sentiment, claiming that the solution will switch from a being a nice-to-have advantage to a must-have component in their arsenal. She said, “In the future, we anticipate an increased integration of powerful data analytics into insurance processes, benefiting all participants in the cyber insurance value chain. As data-driven risk analytics shift from being a nice-to-have advantage to a must-have component that firmly supports insurers at every step of risk management, this integration will enable insurers to confidently keep pace with and respond to the rapid evolution of cyber risk. Simultaneously, it will contribute to the profitability and sustainability of the market as well as will enhance policyholders’ overall experience. “
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