By Ara C. Trembly
In the first article of this three-part series we examined how technology convergence was beneficial for risk managers, and in the second we discussed the potential pitfalls of big data, mobile computing and cloud technology coming together.
But how are risk professionals utilizing these key technologies, and how are they being challenged? Are we, even at this relatively early stage, seeing the promised benefits of convergence in the risk management arena?
Robin Harbage, a director at Towers Watson, points to the role of big data in what his company calls "usage-based auto insurance" or "pay-as-you-drive insurance." This practice uses actual driving data to determine more accurate rates and gives customers ways to control their premiums.
Towers Watson takes volumes of driving data into "a very large database," he said. "We merge this with loss, premium and other data and use [the resulting information] to do risk segmentation to separate good from bad drivers."
An insurer could then contact an individual driver or fleet manager to suggest safer driving patterns that could reduce costs.
"We've been doing this since 2010 at Towers Watson. Even the largest insurance companies are having trouble getting through all their data to reach useful conclusions," he said. Assuming Towers Watson has data that it can analyze for insurers, it is seeing "high demand for this among our client base," he said.
As with any technological venture, however, Towers Watson is encountering challenges. The first, said Harbage, is finding reliable technologies. He notes that, while there are more than 300 vendors of telematics devices and software, a number of these products are "not credible and meaningful."
Another challenge is knowing what data to collect.
"Loss control is critical, but hard to do," Harbage said. "We must make this simple for the insured."
Wireless technology costs may make it expensive to continuously collect data via telematics, so the strategy must be to sample the data at intervals, then compress and reduce the data package size for transmission. There is a balance to be struck between limiting the data collection to reduce costs and making certain that critical data is collected.
Collecting and analyzing the data enables Towers Watson's client insurers to suggest to drivers the behaviors they may need to change (e.g., tailgating) in order to drive more safely. The database also includes police-reported actions by intersection, which could alert fleet drivers, for example, that certain "dangerous" intersections should be avoided.
"As a field there is a lot of transformation here," said Harbage. "Our immediate goal was to get data, but now it is more and more obvious that [original equipment manufacturers] will install equipment (like Onstar) to gather data." He adds that the proliferation of smartphones will also help enable the growth of telematics efforts. "This is something the insurer doesn't have to buy and pay for, but it delivers content back to the insured to enable the process of changing behavior."
Leveraging the Cloud
Cloud technologies are particularly useful for Southwest Airlines' risk management information system, said Chris Thorn, the company's risk manager for corporate insurance.
"Having our system on the cloud has given us more flexibility in collaborating with other entities," he said. "We have added members of our insurance company's claims staff and our insurance broker's staff as users of our system."
Southwest's lead insurance company handles claims alongside its claims handlers using Riskonnect for its software solutions. That provides efficiency in the claims process by eliminating the need to maintain separate claims files, said Thorn.
"It also has improved communications between the handlers by using [the private social networking site] Chatter, he said.
"Chatter works like Twitter and is used to communicate amongst a group of individuals that participate in a particular claim. Having the claim files on the cloud allows our claims handlers to remain connected and productive while traveling to mediations and court appearances."
The company's broker has access to the loss data and exposures necessary for renewing policies, he said. "They can also run trend analysis on this data to aid in developing risk management strategies.
"Having our system stored on the cloud has also helped with business continuity for the risk management department," he said.
"Whether it is a simple snow day that prevents employees from safely driving to work or a large-scale event that prevents access to our headquarters facility for several days, our employees will remain productive."
Thorn also noted that Southwest has not yet implemented some of the capabilities that its vendor can provide, such using mobile devices to report loss events. "We hope to have mobile phones or tablets in the hands of employees that can report these events at the scene," he added.
The Big Picture
Integrating new technologies into the risk management practice at New York University demands examination from two perspectives. Not only must NYU assess its risks in the traditional sense, but it must also determine what risk comes with having access to these newer technologies, said Michael Liebowitz, director of insurance and risk management at NYU.
"That risk is far bigger than the risk of doing an assessment for an organization the old fashioned way," he explained. "So you have to do assessments of new software platforms before you use them. We look at the privacy policies of our cloud providers, their security procedures, how big they are and how these policies are applied globally."
The latter, he added, includes finding out if the provider is in compliance with both U.S. and European privacy regulations.
Most of the technologies for assessing risks (RMIS systems) have gone from mainframe to cloud-based, "so they've already made that jump. Some have gone one step further and become browser-agnostic," he said. The mobile platform for RMIS is "still evolving," he said.
"I'm living in a hybrid world," said Liebowitz of his own situation at NYU. "I'm trying to drive convergence to systems that don't have mobile-to-mobile capability. I need a mobile app that will give me access to our database, but also the functionality of a desktop system.
"What I see in the office is the same as I see on my iPad."
He also wants to export data into a software program that can do the analytics that will reveal the exposures to the organization.
"Where do I then begin mitigation? Right now, the data is in two silos. But we must ensure that the data going in is accurate," he said. The next step involves talking to IT and driving data warehouse information into the RMIS system.
"Ultimately, I will be able to do everything out of one system -- one huge giant data set. We can't live in a siloed world."
The data outcomes, Liebowitz said, "will help determine the severity of risk to our organization; our mitigation strategy and how our mitigation has reduced risk, and the need for ongoing measurement. The biggest variable in all of this is that this is all subjective information based upon the perception of the organization, the risk owners. No two people might see it the same way. So our risk never goes to zero. It becomes managed, then it becomes predictable. Information technology helps, but ultimately it requires people to optimize it."
Liebowitz admitted that his organization was "risk immature" around seven years ago. The value of technology has been in "showing the management team of this organization that risk management can help to bring the organization along, identify pitfalls, then help the organization to avoid those pitfalls so that the strategic mission moves forward.
"We're just part of the process of bringing their vision to light," he said. "It takes a team effort, [taking into account] different sets of glasses for each party involved." In the end, the organization must "synthesize it all down and come up with a grand risk avoidance plan for the organization for now and for the future."
ARA TREMBLY, the technology columnist for Risk & Insurance®, is founder of Ara Trembly, The Tech Consultant. He writes about insurance and technology and can be reached at firstname.lastname@example.org.
April 12, 2013
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