Last week, approximately 20 insurance IT leaders gathered at Farm Bureau Financial Services’ corporate headquarters for the Des Moines Novarica Regional Roundtable. As participants named their most pressing industry concerns, the two issues on everyone’s mind were data and innovation.
The Many Implications of Data
Novarica research shows that the average insurance budget allocated to data projects remains around 20%, but many of the projects business leaders are prioritizing rely on data to function properly. Insurers across all markets are dealing with large quantities of data, but without appropriate data governance, the actionable information held within that data is of no use to carriers. Most of the IT leaders present asserted that they have had data governance programs in place for the past several years, although they were not easy to initiate.
Most participants reported that their organization has a data science team. But the real challenge is making sure that team is equipped with the insurance business knowledge to understand the data. Another hurdle expressed was that highly qualified data scientists may spend much of their time cleaning or loading data, without having enough time to make a larger impact. One participant had a solution to this data labor issue, explaining that her organization had partnered with a local university to have capstone project students conduct some of the more basic data work, freeing up higher-value employees to generate insights.
Participants also reported that they are also relying on data initiatives to fuel straight-through processing and underwriting engines. The real issue at stake, one IT executive noted, is not building out needed capabilities. Instead, it is navigating the regulatory world, including internal legal teams, and ensuring that data is collected and used in a secure, compliant manner. New regulations are emerging to address voice prints, fingerprints, and other touchstones now being regarded as personally identifiable information.
Prioritizing Innovation
Given AM Best’s new innovation rating framework, it was no surprise that innovation was on attendees’ minds. Some carriers are spinning off new companies to separate the new culture, products, and distributions from their main corporate brand, while others are building cross-discipline innovation teams to infuse innovation into their culture and practices. One IT leader at the RRT noted that her organization had built out a separate collaborative innovation space with a dedicated team from different professional backgrounds. The team is given a set amount of funding to initiate proof of concept ideas to determine if they could be beneficial to use on a larger scale at the carrier.
Another participant reported that his executive team no longer looks at IT as a cost center due to recognition of the importance of innovation and investment. AM Best’s plan to score innovation as part of its rating of insurance carriers has helped leadership understand the need for investment in innovation and technology. Understanding that the investment must be measured differently than normal ROI is a key component of the success of fail-fast-and-learn culture. The group also noted that there are an increasing number of people with the word “innovation” in their job title itself, something that would have been nearly unheard of even five years ago.
While the concept of innovating is widespread, there isn’t yet a general consensus on its definition. Sometimes it involves ways of using data, sometimes it’s a talent issue, and sometimes it’s about new product offerings. Whatever the definition, however, it was clear from the Des Moines Regional Roundtable that the insurance industry is changing in myriad ways. To learn more about upcoming Novarica events, including Roundtables, visit our Events and Webinars page.
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