Optimization of Third-Party Data in Canadian Insurance Industry

I had the good fortune recently to share a preview of Novarica’s Canadian Third-Party Data in Insurance executive brief at Insurance Canada’s Technology Conference. The feedback from the audience was incredible, and demand for copies of the presentation was overwhelming, indicating significant interest in new third-party data sources, their use cases, and best practices in evaluating service providers and optimizing impact to the business.

Differences Between Canada and the US

There is an active marketplace for external data in Canada, as there is in the United States, with some important distinctions. Certain classes of data related to health are unavailable in the Canadian marketplace, and data vendors there appear to be more sensitive about publicizing their activities in this space. While it isn’t clear whether the greater sensitivity is related to regulations or cultural, it is a market artifact that is important to be aware of.

Common Use Cases

The most common use case for data is pre-fill to ease the processing of insurance and underwriting, where data is used to bring additional information to the underwriter or is incorporated into analytics that help drive risk selection and pricing. Other popular, but less common, uses include marketing-related and claims and fraud analytics.

Data Quality

The quality and completeness of vendor-provided data varies and must be evaluated for suitability for its use case and class of business. Certain classes, such as restaurants, will have significant amounts of data available thanks to their B2C nature, web and social media presence, and local government regulations. Other classes, such as metal fabricators, lack many of these factors and will have much less data.

In addition to variability in completeness, the source of certain attributes may vary as well. Some data may be modelled and not useful in risk selection but may be beneficial in another use case, such as marketing.

Vendor Evaluation

When evaluating these solution providers, it may be tempting to jump to the proof of concept (POC) phase and begin testing data for its suitability. However, the POC stage is time- and resource-intensive, and it may make more sense to conduct some quick assessments of “showstoppers.” The showstoppers may be vendor financial viability or a technical assessment to determine whether the provider’s platform is robust enough to support the service levels required for a particular use case.

Conclusion

This is an expanding space witnessing significant investment by solution providers and interest by insurers. Third-party data can improve operations in marketing, underwriting, and claims to enable carriers to get an edge over the competition or allow laggards to keep pace. The insurance industry is embracing these solutions—and the solutions are bringing benefits to both carriers and their policyholders.

For more on this market space, read Novarica’s report, Novarica’s Canadian Third-Party Data in Insurance: Overview and Prominent Providers.

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