By Dax Craig, President and CEO, Valen Technologies
There’s no question that technology has fundamentally changed the pace of business. The problem we all face is that the downstream impacts do not necessarily come with quick solutions. Consider the FirstComp example reported by The Motley Fool in May 2011. FirstComp created an online interface for their agents to request workers’ comp quotes. When FirstComp tracked the business impact of this new system, they learned that when they provided a quote within one minute of the agent’s request, they booked that policy 52% of the time. However, their success percentage declined with each passing hour that they waited to provide a quote. In fact, if FirstComp waited a full 24 hours to respond, their close rate plummeted to 30 percent. The question then becomes how do other workers’ compensation carriers meet these new agent demands and still write profitable business?
According to Insurance Information Institute’s 2012 Workers Compensation Critical Issues and Outlook Report, profitable underwriting was the norm prior to the 1980s. Unfortunately, for the last 25-30 years, workers’ compensation has not been profitable for many reasons like increasing medical costs, pricing and market pressures, etc. In order to get back to profitability, underwriters need advanced tools and methodologies that provide access to information in real-time.
Designing a system to quote policies instantaneously, for example, puts increased pressure on underwriting and IT. Agents are the lifeblood of a work comp carrier’s distribution — earning their loyalty is paramount, but not at the expense of writing unprofitable business and driving up already high loss ratios.
I speak with fellow CEOs and business leaders who frequently lament about increasing levels of competition and the need for more sophisticated ways to assess and price risk, evaluate agent performance, and identify trends in their portfolio and the marketplace. At the same time, insurance executives are grappling with scarce IT resources and the reality that implementing new IT projects of any notable size is usually two or more years out.
Rather than succumbing to a bleak picture, visionary leaders find hope in the technological advancements of computing power, for example, as a way to glean valuable insights from their own policy data to meet today’s increasing demands, while growing profitable market share. “Big Data” is arguably the new buzzword for the insurance industry, driven in part by the need for profitable underwriting.
Carriers with larger books of business have a distinct advantage in that they can build robust databases to discern trends and performance within discrete segments of their portfolio. Small and mid-size carriers cannot build the same data assets internally, nor hire large IT and analyst staffs, but there are viable third party resources that allow them to level the playing field with advanced data and analytics. What’s incumbent upon the small and mid-size carrier is to become a savvy buyer of these resources, to insure they receive their desired return on investment.
Important considerations when vetting third party vendors include:
- Cost-benefit and time-to-market – If it takes nearly as long or costs as much for a vendor to deliver a solution as it would take for your own IT department to build, is an external solution worthwhile?
- Ease of use for underwriting – Acquiring more data and analytics isn’t enough. Underwriters need information they can easily synthesize to make better risk selection and pricing decisions.
- Speed, accuracy, and consistency – Companies that outperform their competitors have figured out how to increase the speed and accuracy of their decisions. Plus, they are leveraging data and analytics to produce consistent results across their underwriting department.
Necessity is the mother of invention, and companies who find opportunity in the midst of significant challenges will be the most competitive going forward.
About Dax Craig
Dax Craig is the co-founder, president, and chief executive officer of Valen Technologies. Based in Denver, Colorado Valen is an advanced data and analytics provider for the property and casualty insurance industry. The company leverages its large consortium data assets to help carriers price insurance policies more accurately and achieve lower loss ratios.
Prior to founding Valen in 2004, Dax was founder and CEO of Xertex Technologies, which was acquired by global leader in the wireless antenna industry, Centurion Wireless. Dax proceeded to serve as vice president of global business development at Centurion, where he was directly responsible for global business development including sales, market definition, market segmentation, market research, strategic planning, and market development.
Dax graduated from the University of Tulsa with a bachelor’s degree in business administration and marketing. He earned his MBA in finance from the University of Colorado at Boulder.
About Valen Technologies, Inc.
Valen Technologies, Inc. provides turnkey predictive analytics to the property and casualty insurance industry. Valen’s proprietary consortium database, called Valen Network Data, is used to deliver predictive modeling products that improve risk selection, pricing, underwriting, audit, and inspection processes. Valen Network Data is comprised of nationwide data that includes policy-level information for Workers Compensation, Homeowners, Premium Audits, Commercial Auto and BOP, combined with disparate, non-industry data sources carefully mined to maximize usefulness. Our suite of products that includes PropertyRightTM, InsureRight®, UnderRight®, RateRight®, and AuditRight® are delivered in a fully hosted environment. Learn more about Valen at www.valen.com and http://propertyright.valen.com.