Usage Based Insurance and Big Data – What is a Carrier to Do?

sma ubi tableThere is little doubt that Usage Based Insurance (UBI) (a.k.a. Telematics) is a hot topic in the U.S. Insurance Market. A recent survey from Strategy Meets Action found that while only 18 P&C insurers have an active UBI program in more than 1 state, 70% of insurers surveyed are in some stage of planning, piloting, or implementing UBI programs.

A carrier cannot venture into this space without considering the data implications. Usage Based Insurance, whatever its flavor, involves placing a device in a vehicle and recording information about driving behavior. Typical data points collected include: vehicle identifier, time of day, acceleration, deceleration (i.e. braking), cornering, location, and miles driven. This data can then be paired with publicly available data to identify road type and weather conditions.

Now consider, a 20 mile morning commute to work that takes the driver 35 minutes. If the data points noted above (9) are collected every minute, that 20 mile commute would generate 315 data points (about 16 data points per mile driven). If the average vehicle is driven 1000 miles in a month, it would generate 16,000 data points each month or 192,000 data points each year. Now consider what happens if a carrier enrolls even 1000 vehicles in a pilot UBI program. Within a year, the carrier must accommodate the transmission and storage of over 190 million data points. Progressive Insurance, the leader in UBI in the U.S. market, has been gathering data for 15 years and has collected over 5 Billion miles of driving data.

Even more critically, the carrier must find a way to interpret and derive meaningful information from this raw driving data. The UBI device won’t magically spit out a result that tells the carrier whether the driving behavior is risky or not. The carrier must take this raw data and develop a model that will allow the carrier to score the driving behavior in some way. That score can then be applied within rating algorithms to reward drivers who demonstrate safe driving behaviors. As with all modeling exercises, the more data used to construct the model, the more reliable the results.

While data transmission and storage costs are relatively inexpensive, these are still daunting numbers, especially for small and mid-sized carriers. How can they embrace the changes that UBI is bringing to the market?

From a pragmatic perspective, these smaller carriers will need to partner with experts in data management and predictive modeling. They will need to leverage external expertise to help them successfully gather and integrate UBI data into their organizations’ decision making processes.

In the longer term, credible 3rd party solutions are likely to emerge, allowing a carrier to purchase an individual’s driving score in much the same way that credit score is purchased today. Until then, carriers need to make smart investments, leveraging the capabilities of trusted partners to allow them to keep pace with market changes.

From Web Analytics to Customer Intelligence

CIWe recently were invited to present internally at a prominent health care payer network about the rapidly changin role and importance of web analytics. Gone are the good old days when it was enough to just run a log analyzer or put a simple tag to collect all the information needed about the interactions a customer has with you. Analysis used to be limited in scope and focus on a handful of parameters that could be optimized, such as bounce rates and conversion rates, by tweaking the checkout flows and usability improvements.

Not that conversion rate optimization is less important today but as customer interactions focus less and less on just the company website, the new critical need is to try and get a coherent picture of general customer behavior across all touch points. Instead of trying to infer customer thoughts and concerns through their clickstreams, many are now openly expressing needs and problems through social media.

This goes beyond “cross channel marketing” into the new area Forrester and others are now calling Customer Intelligence (CI). Similar to the way business data evolved from simple reporting into Business Intelligence (BI), as customer data gets more complex and varied, putting everything together and drawing conclusions and trends from it will need to employ similar methods and tools.

This is primarily a mindset change from the somewhat passive “analytics” to the broader and much more active role of managing and providing customer intelligence.

The expectations from Web Analytics professionals and systems are changing as well from the cyclical analysis and response to the providing of on demand, immediate intelligence for both individual and aggregate customer needs and problems. In some companies this evolved into a real “command center” that has 24/7 monitoring and interaction tools to listen, interact and respond to customer needs.

There are a few challenges that mark this transition:

  • Quantity: The quantity of interaction points is exploding due to social media, online videos and mobile devices.
  • Traceability: It is very hard to identify users across various media. Mapping a web user to a Facebook account or twitter feed is not always possible.
  • Immediacy: There is an overwhelming need and expectation for immediate response.

Here is a conceptual diagram of this new reality illustrating all the new interaction points being consolidated into the central Customer Intelligence and the introduction of the analytical services that can be used to optimize the user experience.

These analytical services can work on both an individual and aggregate level:

  • Individual: If we can aggregate customer data and interactions from different channels, this will dramatically improve segmentation, insight for sales and customer service professionals interacting with the customer, and services that can target offers or content in real time based on user past interest and behavior.
  • Collective intelligence: By looking at customer activity across all channels we can:
    • Optimize targeting through the different channels and our investment in them
    • Improve recommendations
    • Identify trends
    • Identify problems / issues / sentiment changes and address them quickly.

To start implementing Customer Intelligence, the process is now becoming quite similar to implementing a BI solution

  • Expand use of social listening and data capturing tools and store their data
  • Adjust data models to accommodate multiple user identifiers, channels, devices etc.
  • Redefine KPI’s
  • Define and implement analytical services
  • Adjust reporting and analytics
    • Real time
    • Dashboard level

The Web Analytics vendors are starting to step up and offer tools and support for Customer Intelligence. In upcoming posts we’ll look into WebTrends, Omniture, Google and IBM to see how their offerings stack up and the type of solutions they support.

Customer Intelligence – Analyzing and Acting on the Data

bubble cloudsPart one of this topic addressed leveraging social media to improve customer satisfaction.  This is the initial step towards a broader goal to create a robust Customer Intelligence framework that allows P/C insurers to listen, connect, analyze, respond and market to customers in a much more proactive and targeted way.

Customer Intelligence is the process of collecting relevant and timely information about customers and prospects, consolidating the data from all the different sources into a cohesive structure, and providing the sales, service and marketing functions with tools that can leverage this intelligence.  The sources of this data not only include the obvious ones such as a carrier’s Customer Service Center, and Policy or Claims Admin system, but should also originate from the Agent, Marketing Surveys, Telematics, and Social Media, including Twitter and Facebook – all mashed up to produce a Balanced Scorecard and Predictive Analytics.

Most CRM systems need to be updated to include new columns in their user profile for data in addition to email and phone number such as Facebook name, Twitter Handle, etc. With the social listening and response management connected to your CRM, a social inquiry can be viewed in context and the activity recorded for future interactions, available to Customer Service Reps or even Agency personnel. This level of social customer intelligence is going to differentiate companies that do it right, becoming a key element of a carrier’s business strategy.

A fully integrated Customer Intelligence platform provides benefits such as:

  • A single integrated interface to many social media outlets
  • The ability to manage multiple writing companies
  • Create and track cases, contacts, accounts, and leads from real-time conversations
  • Manage marketing campaigns and track social media marketing ROI
  • Cue CSR’s on upsell and cross sell opportunities

A carrier should determine the Key Performance Indicators (KPIs) that matter most to their business goals, then view the appropriate data in graphical dashboards to track effectiveness of their efforts.  It’s important to tie those KPIs to their influence on customer behaviors such as loyalty and increased sales.  But carriers must also be aware to not look at positive or negative changes in the wrong way and fully understand the reasons for success or failure.  Reacting to success by following up with more online advertising in certain media outlets, may not produce the desired results, when in fact the reason for an increase in sales is due to the upsell and cross sell efforts of CSRs.

Usage Based Insurance – Who are carriers’ target audience and who will be left?

usage based insuranceUnless you live totally off the grid, you have seen a commercial for Progressive’s Snapshot program.   Progressive and other major carriers are offering and forcefully marketing usage based insurance (UBI) to their customers.   The idea behind usage based insurance (a.k.a. Telematics) is that the insured’s premium is based on his/her actual driving behavior as captured by a device that is plugged into the vehicle and transmits data about driving habits to the carrier.

At least 18 states have 4 or more Personal Auto programs implemented, and 49 states have at least 1 program implemented.  In December 2012, Strategy Meets Action released research findings that about 70% of carriers have a UBI program in place, in pilot, or under consideration.  It was noted that if UBI captures only 10% of the market by 2020, 25 million cars will be insured through some type of UBI program.   If UBI captures 20-25% of the market, carriers without UBI will see the impact of adverse selection on their current book-of-business.

So what kinds of customers are carriers targeting, and if UBI takes hold of the market as promised, who will be left in non-UBI programs?

The obvious answer to the first question is safe drivers – the very slice of the market that every carrier wants to attract and to retain.  Progressive has released findings from its detailed analysis of 5 billion driving miles that demonstrated that drivers with the highest-risk driving behaviors have loss costs that are approximately 2.5 times the loss costs of drivers with the lowest-risk driving behaviors.   By targeting these lowest-risk drivers with special discounts, carriers attract the best of the best while improving their overall book of business.  Once a safe-driver is enrolled in the program, the special discounts also improve retention because the discounts get larger.  Given the proprietary nature of the driving behavior data that the carrier has collected, it is much harder for another carrier to match or beat that price point.

Beyond the safest drivers, there are other market niches that are well-suited to UBI programs. Consider the household with teen drivers or with aging drivers. UBI is an attractive product because it offers a way to monitor driving behavior among higher risk drivers within the household, and the very act of monitoring driving behavior and the feedback mechanisms have been shown to improve their driving behaviors. UBI programs are also a good fit for households where one or more vehicles see little use. With a growing cadre of telecommuters in the workforce and growing numbers of retiring baby boomers, how many vehicles sit parked for days at a time, especially during peak drive times?  Even if these drivers aren’t among the safest of drivers, their limited usage mitigates their exposure. Finally, consider the driver who has had 1 or 2 tickets or 1 or 2 accidents but is convinced that he/she is a safe driver; they were just unlucky. A UBI program allows these drivers to prove that they are safe drivers, lowering their rates and allowing the carrier to capture a truly safe driver that other carriers write-off as accident prone. At worst, a UBI program ensures that these drivers will pay rates based on their actual driving behavior, and the feedback loop provided with the programs can actually improve their driving behavior.

So who is left?   The drivers left outside a UBI program fall into two categories – those who could benefit from a UBI program but haven’t made the switch yet, and those unsafe drivers who would be penalized by entering a UBI program.

As better drivers join UBI programs, the majority of drivers in non-UBI programs will reflect poorer driving habits and much poorer claims experience. Carriers who offer only non-UBI programs will see their loss ratios deteriorate which will force rates higher. However, this will simply give the remaining safer drivers an even greater incentive to switch to carriers with a UBI program.  The market will bifurcate and carriers without a UBI program will find themselves essentially managing a book-of-business that is focused on non-preferred business.

The later that a carrier chooses to launch a UBI program the harder it will be to capture desired market share. At this point, the driving behavior associated with these programs is proprietary to the carrier.  While that may change in the future, it is currently impossible to purchase a driving score in the same way that a carrier purchases a credit score for a prospective insured. Therefore, once a driver is tied to a carrier’s program, it will be difficult to lure that driver to another program because the new carrier won’t know nearly as much about him/her as the current carrier.

The questions that remain are: how quickly will customers embrace these programs; how quickly will this change happen?   UBI programs have the potential to upend the Personal Auto market in much the same way that the introduction of credit scores did.   Will 2013 be the year that we begin to see real evidence of this coming trend?

Are you Paralyzed by a Hoard of Big Data?

Lured by the promise of big data benefits, many organizations are leveraging cheap storage to hoard vast amounts of structured and unstructured data. Without a clear framework for big data governance and use, businesses run the risk of becoming paralyzed under an unorganized jumble of data, much of which has become stale and past its expiration date. Stale data is toxic to your business – it could lead you into taking the wrong action based on data that is no longer relevant.

You know there’s valuable stuff in there, but the thought of wading through all THAT to find it stops you dead in your tracks.  There goes your goal of business process improvement, which according to a recent Informatica survey, most businesses cite as their number one Big Data Initiative goal.

Just as the individual hoarder often requires a professional organizer to help them pare the hoard and institute acquisition and retention rules for preventing hoard-induced paralysis in the future, organizations should seek outside help when they find themselves unable to turn their data hoard into actionable information.

An effective big data strategy needs to include the following components:

  1. An appropriate toolset for analyzing big data and making it actionable by the right people. Avoid building an ivory tower big data bureaucracy, and remember, insight has to turn into action.
  2. A clear and flexible framework, such as social master data management, for integrating big data with enterprise applications, one that can quickly leverage new sources of information about your customers and your market.
  3. Information lifecycle management rules and practices, so that insight and action will be taken based on relevant, as opposed to stale  information.
  4. Consideration of how the enterprise application portfolio might need to be refined to maximize the availability and relevance of big data. In today’s world, that will involve grappling with the flow of information between cloud and internally hosted applications as well.
  5. Comprehensive data security framework that defines who is entitled to use the data, change the data and delete the data, as well as encryption requirements as well as any required upgrades in network security.

Get the picture? Your big data strategy isn’t just a data strategy. It has to be a comprehensive technology-process-people strategy.

All of these elements, should of course, be considered when building your big data business case, and estimating return on investment.

Adobe, IBM, WebTrends, and comScore named leaders in Web Analytics

Independent research firm Forrester recently released their annual “Forrester Wave: Web Analytics, Q4 2011” report naming Adobe, IBM, comScore, and WebTrends as the current leaders of the web analytics industry. AT Internet and Google Analytics were also included as “strong performers” while Yahoo Analytics took 7th place as the lone wolf in the “contender” category.

Not surprisingly Adobe Site Catalyst and IBM Coremetrics stood out with the top two scores overall but WebTrends Analytics 10 and comScore Digital Analytix showed major stengths as well. Unica NetInsight, another offering from IBM did not make the list because of its inevitable fate to be merged with Coremetrics. In 2010, IBM acquired both Unica and Coremetrics. The Forrester report states, “IBM is incorporating the complementary and notable features of Unica NetInsight into a merged web analytics solution based on the Coremetrics platform.”

The full report can be downloaded from Adobe or WebTrends and will likely show up on other vendor sites soon.

Dunce Holding Paper Money

Personnel, personnel, everywhere, nor any data to drink.

IT’S UNFORTUNATE: Large amounts of money are spent on new hires, yet little is left for employee and data improvement

I recently had an Executive Director of a Cancer Institute tell me,

“At this time, we plan to use simple spreadsheets for our database.  We are committing more than $500,000 for investment in personnel to start our translational laboratory this year.  I hope  we can subsist with simple spreadsheet use for our pilot studies.”

This sentiment immediately followed a detailed discussion, one that I’m very familiar with, concerning disparate researchers’ databases and how organizations’ needs remain unsatisfied, suffering from lack of integrated data.

Just so we’re all on the same page, let me make sure I understand this situation correctly –

  1. You are currently using “simple spreadsheets” to assist researchers with all things data. You’ve astutely noticed that these stale methods don’t meet your needs, and you agreed to a meeting with Edgewater because you’ve heard positive success stories from other cancer centers.
  2. You just spent three quarters of a million dollars on fresh staff for a new translational lab.
  3. You are now budget-constrained because of this arrangement and want these new hires to use “simple spreadsheets” to do their new job… the same ineffective and inefficient spreadsheets, of course, that caused the initial trouble.

Did I understand all that correctly? I didn’t grow up in the ’60s, so I’ll continue to pass on what he’s smoking.

So who wins with this strategy, you ask? No one!

We keep buying things thinking ‘that’ll look better’ and it just doesn’t

It’s unfortunate for the researchers because they continue to rely on an antiquated approach for data collection and analysis that will continue to plague this organization for years to come.

How many opportunities will be overlooked because a researcher becomes overwhelmed by his data?

It’s unfortunate for the organization because it’s nearly impossible to scale volumes (data aggregation, analysis, more clinical trials, more federal/state grant submissions, etc.) with such a fragmented approach. How much IP will walk out of the door for these organizations on those simple spreadsheets?

It’s unfortunate for the brand because it can’t market or advertise any advances, operationally or clinically, that will attract new patients.

It’s unfortunate for the patients because medicine as an industry collectively suffers when:

  • Surgeons under the same roof don’t recognize and notify their counterpart researchers that they have perfect candidates for the clinical trials they’re unaware of.
  • Executives continue to suffer budget declines from lower patient volumes and less additional revenue from industries partnering with cancer centers that have their act together.
  • Researchers under a single roof don’t know what each other are doing.

As in the picture above, “more” doesn’t necessarily mean “better.” Ancillary personnel and sheets of data don’t necessarily equate to a better outcome. Why continue to add more, knowing that this won’t solve the problem? Why infect more new hires with the same sick system? Why addition instead of introspection?

So, just as I told him in my response, I look forward to hearing from you in about 12-18 months; that’s roughly the amount of time it took the last dozen clients to call Edgewater back to save them from themselves.

Black-Swan-logo-Revise

Keeping the Black Swan at Bay

A recent article in the Harvard Business Review highlighted some alarming statistics on project failures. IT projects were overrunning their budgets by an average of 27%, but the real shocker was that one in six of these projects was over by 200% on average. They dubbed these epic failures the “black swans” of the project portfolio.

The article ends with some excellent advice on avoiding the black swan phenomenon, but the recommendations focus on two areas:

  • Assessments of the ability of the business to take a big hit
  • Sound project management practices such as breaking big projects down into smaller chunks, developing contingency plans, and embracing reference class forecasting.

We would like to add to this list a set of “big project readiness” tasks that offer additional prevention of your next big IT project becoming a black swan.

Project Management Readiness: If you don’t have seasoned PMs with successful big project experience on your team, you need to fill that staffing gap either permanently or with contract help for the big project. Yes, you need an internal PM even if the software vendor has their own PM.

Data Readiness:  Address your data quality issues now, and establish data ownership and data governance before you undertake the big project.

Process/organization/change management readiness: Are your current business processes well documented? Is the process scope of the big project defined correctly? Are process owners clearly identified?  Do you have the skills and framework for defining how the software may change your business processes, organization structure and headcounts? If not, you run a significant risk of failing to achieve anticipated ROI for this project. Do you have a robust corporate communication framework? Do you have the resources, skills and experience to develop and run training programs in house?

Let’s face it: experience matters. If you’re already struggling to recover from a technology black swan, you are at considerable risk for reproducing the same level of failure if you don’t undertake a radical overhaul of your approach by identifying and addressing every significant weakness in the areas noted above.

We have developed a project readiness assessment model that can help you understand your risks and develop an action plan for addressing them before you undertake anything as mission critical as an ERP replacement, CRM implementation,  legacy modernization or other mission critical technology project. If you have a big project on your radar (or already underway), contact makewaves@edgewater.com to schedule a pre-implementation readiness assessment.

Healthcare’s New Mantra

Reduce Costs;
Improve Outcomes & Quality; Increase Revenue & Growth

Everything we do for our healthcare clients’ improves these fundamental core principles – Everything! I mean it, seriously, we have a history of delivering innovative solutions to common problems and each one of them helps accomplish these goals.

REDUCE COSTS: I know you have too many people collecting and scrubbing data – patient safety data, quality data, financial data, operational data….and so on. I also know you pay these people too much money to just be data collectors. Stop wasting your money and their skill sets. Data collection should be a commodity, it’s definitely NOT a competitive advantage. We’ll integrate your data, clean it up before it’s used, and present it in a way that is intuitive and actionable. We’ve done it before and guess what happened….yup $$$$ Millions $$$$$ of dollars saved.

IMPROVE OUTCOMES: I know you spend the majority of your time collecting data, leaving very little time to analyze and act on it. Your patients don’t benefit from data collection. They benefit from your ability to take the data you’ve collected, interpret it, and embed the best practices you’ve uncovered back into the clinical workflows. They also rely on you to identify areas of improvement to educate clinicians before a small problem turns into a big lawsuit. Let us enable advanced analytics with strong data governance to improve clinical processes across the continuum of patient care.

IMPROVE QUALITY: Question: Are you quality driven or compliance driven? Ok now be honest with yourself and answer again. You can have the best processes in the world in place to massage your numbers and report out to CMS in a timely and efficient manner but guess what, that doesn’t translate into better outcomes. BUT…if you have the processes in place to ensure high quality outcomes, your quality numbers will naturally improve. Outcomes first! We’ll align your data needs with your reporting needs, automate the collection and aggregation, and put data in the hands of people who know what to do with it…(before the patients are discharged).

INCREASE REVENUE: Do you know where your high revenue drivers lie? What procedures physicians, payers, discharge service codes, and DRG’s make you the most money? Can you plan and forecast your net patient revenue based on these changing dimensions and their expected volume 3, 6, 9 months out? If you can, congratulations you’re one step ahead of your competition. If you can’t, we can help you accomplish all of these goals as well as any other need your CFO and Strategic Planners have.

GROW: Do you want to track where you patient referrals are coming from to get a better ROI on your marketing dollars? We’ve implemented healthcare XRM (the “X” is for any stakeholder group – patients, physician groups, managed care plans, you name it) to tie the marketing campaign directly to the patient visit.

“Get Real” with your CRM solution

A couple years back, Gartner Group released a CRM research study that predicted “through 2006, more than 50 percent of all CRM implementations will be viewed as failures from a customer’s point of view….”

Sad to say but things are not much better today! Retaining and enhancing customer relationships remains a top 5 business issue on the Gartner CIO Agenda. It is critical, especially in today’s economy, that companies continue to invest in managing its most valuable asset, its customers. According to AMR Research, companies are investing in CRM to the tune of $14 billion dollars a year.

Is my CRM Solution Successful?

So, you have made your investment and implemented your CRM tool. Are you part of the 35% of successful deployments, or sadly the 65% that have fallen short?

If there is any doubt where your company falls, consider the following questions…

  • Are you still limited in your ability to grow your top tier accounts?
  • Are your national accounts meeting their revenue commitments?
  • Are your people using Excel and Outlook to fill gaps that your CRM tool is not meeting?
  • Can you track and measure your sales team performance? Are they closing activities and, more importantly, deals?
  • Can you assess the effectiveness of your marketing spend and campaigns? A CRM worth its salt should have great marketing capability. Your CRM should seamlessly integrate with a commercial grade marketing vendor, like email marketers and direct mail vendors. These vendors provide essential functionality including email tracking and spam prevention, integrate MS Word mail merge and direct marketing capabilities, and campaign budget management.  The bad news is that CRM solutions rarely offer this level of marketing functionality out of the box.
  • Is your CRM system a data silo? Is your customer data not feeding other enterprise tools, or are you not interfacing with transaction data to measure projected revenue to actual revenue?

If you answered yes to any of those questions, your implementation may be heading in the wrong direction. Now that you realize the hard reality, how did you right the ship?

  • Perhaps you drank the ASP/SaaS model kool-aide. The cloud is a great and cost effective solution…however, “Success not Software” does not mean “No Risk”. While the promise of speed to market with limited CapEx layout is attractive to everyone, the shortcuts you take early on in your deployment will cost you double down the road.  I have spoken with many people that have struggled to scale their CRM solution to meet the changing needs of their business and is cost prohibitive to deploy across the enterprise.
  • You assumed that CRM success comes out of the box. CRM software is usually designed for many types of business. To make the software work for you, no matter what the vendor tells you, there will be configuration and some customization to meet the unique needs of your industry. CRM packages are designed to meet the needs of the largest common denominator. A Product screen for an insurance company will not look like the Product screen for a hospitality company.
  • You did not focus on critical factors that drive user adoption such as, familiar interface, standardized processes, organizational readiness, change management, or ease of use.

Get on the Road to Recovery

Determining that your CRM implementation has problems may be instant or it may materialize over time. Regardless, you must analyze the situation and determine your rescue strategy. So, what can you do now?

Treat your CRM system as the critical Enterprise solution that it is. You would not implement a new accounting system without first understanding accounting practices across the organization, identifying integration points, and dealing with change management. It is important to note that the success factors for CRM implementations rest largely outside the scope of the software itself. To establish the best implementation strategy, you must

  • Identify the Organizational impact early on and build change management strategy and tools accordingly.
  • Get executive buy-on on the new strategy and include stakeholders from across the organization (Marketing, Sales, Finance, Customer Service, IT)
  • Pay attention to data quality, specifically data governance practices and procedures. There is nothing more detrimental to user adoption than bad data.
  • Standardize AND SUPPORT your business processes across the enterprise
  • Highlight benefits to sales team often (i.e. up-sell, cross-sell, single system, clean data, 360° view of the customer)
  • Understand your industry-specific CRM needs and ensure your can configure screens and workflows to match
  • Address the complexities of integrating into your enterprise architecture with multiple legacy data silos and even offline processes
  • Provide the right customer intelligence with dashboards and robust reporting to the right people, at the right time, to effect change

Carefully consider the points above and invest in CRM tool experience when designing and implementing your solution. Don’t fall into the trap of trying to learn a new tool on the job! There are many functions and features available within the package, and outside through the open source collaborative environment. Bending your business processes to meet your software will affect user adoption.

Look for a CRM partner with a broad and proven resume of integration and enterprise information system implementations. If you treat your CRM implementation like the critical enterprise application it is, you are more likely to be part of the 35% of CRM implementations that succeed!