By Dax Craig, President and CEO, Valen Technologies
The insurance industry is affected more than most by the aging baby boomer population. In the last 10 years, the number of insurance workers 55 or older has increased by 74%, compared to the 45% increase for the overall workforce. With 20% of our workforce nearing retirement, McKinsey noted in a May 2010 Report that we will need 25,000 new underwriters by 2014.
Where will the new underwriters come from? And more importantly, how qualified will they be relative to today’s top underwriters? According to a FirstBest study, only 20% of companies have formal underwriting training programs. What steps do workers comp carriers need to take to ensure the next generation of underwriters is prepared?
Formalizing information transfer from your most experienced underwriters is critical to institutionalizing the knowledge they have accumulated, and many retirees are receptive to mentoring the new generation. What isn’t easy to replicate is that certain “artistic” talent the best underwriters bring to the table.
How can the new generation bridge this gap? One clear advantage that younger workers bring to the table is that they are tech savvy. The new workforce thinks differently than the more seasoned workforce. They are relentless about finding quick and efficient solutions through the use of technology, after all, they have grown up with the ability to search Google and see results in less than one second. The younger generation simply doesn’t accept that accessing information should be a cumbersome, lengthy process, and their drive to leverage data in new ways can be a game changer in workers comp.
With combined ratios for workers comp hovering around 115 percent and projected to rise, Ernst & Young’s Global Insurance Center 2011 US property/casualty insurance industry outlook stated that the number one thing carriers can do to improve their performance is to achieve superior underwriting.
When you combine the impending workforce turnover with an insurance line in turmoil, savvy insurance carriers are turning toward the use of advanced data and predictive analytics as a natural answer to these dramatic problems.
Underwriters have more information available to them than ever before. Unfortunately, it is impossible for underwriters to synthesize all of it to make policy risk decisions in an effective and efficient manner.
Carriers that have unlocked the vast amount of available data are more competitive. Built from this data, predictive models have emerged to synthesize Big Data to drive evidenced-based decision making. The new “art” in underwriting is incorporating data and analytics into how underwriters make risk selection and pricing decisions, and creating reliably consistent results across a book of business.
In the past, it was difficult for all but the largest carriers to use predictive analytics because building predictive models requires a large number of historical policies and the advanced mathematical resources to build the predictive models. Companies like Valen have made that easier by taking a carrier’s own data combined with third party data, and synthesized it into risk reports easily understood by an underwriter. At Valen, we build predictive models from our contributory database, the largest of its kind in workers’ comp with 4 million recent policies, and additional data that has proven to be predictive of a policy’s future performance. By helping carriers leverage their own data and access third party data, companies like Valen provide a more heterogeneous data set to defend against selection bias inherent in single carrier data samples.
The next underwriting generation is eager to take on the innovative technological and analytical advancements that will solve the tough problems carriers are facing. I’ve often said that insurance doesn’t give itself enough credit for being an interesting industry. Simply put, insurance is a complicated and intellectually stimulating business. We can make this industry a very attractive career proposition for the brightest minds entering the workforce, and open ourselves to new ways to solve our biggest challenges.
About Dax Craig
Dax Craig is the co-founder, president, and chief executive officer of Valen Technologies, an advanced data and analytics provider for the property and casualty insurance industry. Valen 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, a leading provider of antennas for Wi-Fi, in-building wireless, and telematics. He led the progress of the company from a concept he developed as an MBA student at the University of Colorado to its eventual acquisition by Centurion Wireless, now part of Laird plc. At the time of Xertex’s acquisition, Centurion was a global leader in the wireless antenna industry with over $150 million in annual revenue, seven factories, locations in five countries and over 1,500 employees.
Dax proceeded to be 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.
Believing in the importance of community involvement, Dax founded the Monticello Foundation, an organization of young professionals that raised money for Denver area children’s charities. He also founded Stay Tuned Colorado, a non-partisan organization that engaged young professionals to become more involved in the process of selecting national political leaders.
He currently serves on the executive advisory board of the University of Tulsa’s College of Business and is a member of the Young Presidents Organization. Most recently, Dax was selected as a board member to the National Sports Center for the Disable. Previously, he has served on the board of several community organizations including the Denver Opera and the Metro Denver Sports Commission.
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.