Confessions of a Diehard Insurance Data Fan: Part 2

By | November 25, 2019

After Bill Pieroni, the CEO of ACORD, delivered a presentation about ACORD’s latest study, “Intelligent Growth: Intent, Decisions, Outcomes,” he sat down with Wells Media’s Andrew Simpson to talk about winning carrier strategies.

Pieroni, who discussed carrier growth and profit variances in the first part of this two-part interview, basing his comments on findings from 20 years of data for 200 global insurance carriers—also turned his attention to data itself, responding to Simpson’s questions about winning data strategies for carriers and agents. (Related article, “Confessions of a Diehard Fan of Data: An Interview With ACORD CEO Pieroni-Part 1″)

Q: What do you mean when you say a carrier should have a data strategy? What is a data strategy?

“If you’re not using data and facts and analytics and digital capabilities, you’re just not going to be able to run faster. Running faster works, but ultimately it leads to a downfall.”

Bill Pieroni
ACORD CEO

There are two types of organizations. Those that are absorbing data and those that are immersed in it. Simply accumulating it for the sake of accumulating it and not really deploying it and using it is not what we’re talking about here. The strategic intent says, “How am I going to acquire it? How am I going to synthesize it? Then after I’ve acquired and synthesized it, how am I going to develop insight from it and then how do I deal with the implications? What behavior-based change do I want to occur? What improvement in loss costs? In severity? In frequency? Improved underwriting capacity? What do you want to do with this thing, right? How am I going to deliver it to an individual or within a business process via technology to elicit the behavior-based change, the implications that I want? And then how are you going to measure refine it over time because you’re not once and done?

Strategic intent deals with everything from data strategy, logical and physical data model, infrastructure and capabilities to acquire and synthesize underlying business processes and organizations to use it. And then an iterative process—how do I get it better? How do I use this data over time to get better and better?

And you saw the economics of the P/C industry. These are very narrow bands. The lowest performers in this study on average, a little over 103 and the best at a 96 [combined ratio]. This is not a huge standard deviation in our performance.

So you will hear CEOs say, “Don’t sweat the small stuff.” This is all small stuff. We’re fighting for inches here. The essence of strategic intent is resource allocation.

Q: How do you determine what data you need or is going to be useful to you?

Pieroni: If you’ve seen one carrier you’ve seen one….There’s so much variation in how you operate. The point is there are no generic data strategies. You have to look at your organization.

You’re triggering the question in my mind that I always struggle with: Do you develop a winning strategy and adapt your organization’s ability to execute? Or do you develop a strategy that the organization can execute?

Q: The winners outsourced strategically to both grow and create value. They knew what they couldn’t do so they figured it out.

Pieroni: Very thoughtful. They understood what was strategic and operationally important. And if they were very good at it, they kept it. And if they weren’t, they… It’s expensive to say, “I’m not good at something, so I’m going to pay you to do it. But I’m also going to pay people to sit next to you because I need you to go away.”

Remember you’re double-expensed here. So the idea somehow that you’re going to use outsource and save money—not for everything. You may say, using data as an example, “The ability to develop meaningful insight from data is a real source of inbound advantage. I’m not good at it today.” Don’t pay someone else to do it. Pay someone else to do it for knowledge transfer and engage in a learning by doing exercises with them and then pull it back. You can’t just say, “I’m not good at it. What can I do?” Well then if it’s strategically and operationally important, then you better be good at this thing.

Confessions of a Diehard Fan of Data: An Interview With ACORD CEO Pieroni (Part 1)

Q: The intelligent growers succeeded in differentiating themselves in some meaningful way but you said that it’s not easy. So what role does data play in that piece?

Pieroni: Incredibly important because meaningful differentiation to me means consumers are willing to pay and stay, right? So I’ve differentiated myself not on price, but I give a better experience. I position my brand better, claims paying ability. Example, 90% of U.S. personal lines P/C customers leave their current carrier for one of two reasons: price goes up more than 10% or a claim is grossly mishandled.

Can I deliver? Can I turn a claims experience into not an opportunity to lose them, but to actually increase cross sell, to enhance it.

Without data, how do you understand what consumer preferences are? How do you understand what makes them more loyal? What makes them disloyal? How do you understand what they’re willing to pay for? It begins and ends with data.

Now, a hundred years ago, an effective agent would look you up and down and try to guess at what mattered to you. These days, we’re trying to inculcate and codify what good agents did for decades. But how do you do it on a 24×7 call center? How do you do it online? How do you do it when they’re submitting a giant claim through a brokerage organization? Only data-, fact-based decision making can put you in what I call a Darwinian evolution.

[T]hose that use data to make decisions, allocate resources, shape interactions, develop products—they know what they’re doing. They’re not asking what happened, but they’re saying what’s the best thing that can happen? And with the data you can do that.

I think intuitively rules of thumb and anecdotes worked for decades, if not centuries in our industry. These days, no. Get out of here with the anecdotes. Don’t talk to me about what occurred in the hard market of 1970 and “Oh, when we got off the gold standard, what happened?”

Stop, what does the data say?

Q: You looked at the distribution channels. Independent agents come out looking good, right?

Pieroni: Always. Every study, despite the fact that people talk about the direct. Look, someone who values advice, who cares about and understands the importance of making an insurance decision isn’t worried about 10%. So the average auto premium in the U.S is $1,200-ish.
So, okay, look, I know $10 a month could mean a lot to someone, but if you’ve got a relatively expensive car and by the way, the number one asset for the average American household is the car—

Q: Is that agent, is he or she, the underwriter? Is he or she the data?

Pieroni: Sometimes the independent agent has all the data and knows you better than anyone else. But by the way, I think the better independent agents say, “Which carriers do I best do business with that helped me be better?”

Effective, independent agency writers develop capabilities to increase the value proposition of the independent agent. Our members who are independent agency writers are investing to make their independent agents better, not to get in between the insured and them. How do I make that license support staff? How do I make that independent agent more effective in anticipating needs, in understanding “How can I help you?”

Q: How can agents and brokers use data better? Or how would they fit into this equation?

Pieroni: Agent and brokers are the best users of data in the entire insurance industry. It’s what they’ve been doing their entire life. I think the real question is, how can agents and brokers who are the best users of data—because in the end they’re trying to understand your need and couple it with a solution—how do they complement, extend what they currently do?

Customers have two signs around their neck. One says, “I’m really important,” and the other one is, “How much product are you going to buy from me?” Agents are good at both. They always see the “I’m important,” which means hold the door open for me, don’t hold the door for me, don’t call me, call me every day. I got that one. And the other one is what products do they need? [Think about] how do insurance agents and brokers take what they normally do extremely well, complement, extend and build upon [it]?

This technology is not a substitute. It makes them better. It makes them more accurate, more disciplined about it. How do they take the data that sits within their agency management system….But that does require behavior-based change on their part because probably, they’re very successful. How much more successful do they want to be?

It’s an opportunity for them to do what they already do even better.

Q: Finally, where is data headed?

Pieroni: I think the future is already here. It’s just unevenly distributed. I think we’ve got the haves and the have nots. My concern is that for the carriers who have systematically under-invested in data, it’s a challenge for them because it’s not simply about money. There are problems that money could solve and problems that money cannot solve. Sometimes it’s the culture. Sometimes it’s the mindset. Sometimes it’s the values of the people. Sometimes it’s the behaviors. Sometimes it’s the legacy processes. It’s not just technology because then you could throw money at it. It’s can you get behavior-based change to do things differently based on that data?

So where is it going? You’re going to see those that use data complemented with opinions and skills and expertise and some anecdotes, but based on data, [they] are going to far outpace in terms of growth. Their Darwinian evolution is occurring right now in every country. Whether it’s a developing market or mature market or an opportunistic market, you’re seeing them pull ahead in terms of growth and economics.

When you think about the pace of change, change is increasing—and at increasing rate. Your ability to deal with that, if you’re not using data and facts and analytics and digital capabilities, you’re just not going to be able to run faster. Running faster works, but ultimately it leads to a downfall. It’s just not trying a little harder, running a little faster, you have got to run differently and smarter. And I think data’s the underlying factor.

See related main article, “How ‘Intelligent’ Insurers Manage to Both Grow and Create Value: ACORD Study,” for details of the study results.

Also from the ACORD report:

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