How can property and casualty insurers effectively use Big Data and Risk Analytics to underwrite better? This presentation explains the role of Big Data in insurance, talks about how to use Big Data along with traditional data methods and presented information about the technology around Big Data and its use for commercial insurance.
2. WHO IS THE
WRITER?
WHERE IS THE
DATA FROM?
What is so unusual about this?
CLUE: Is it not in the content
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3. A quality first quarter earnings announcement could push shares of H.J. Heinz (HNZ) to a new 52-week
high as the price is just 49 cents off the milestone heading into the company’s earnings release on
Wednesday, August 29, 2012.
The Wall Street consensus is 80 cents per share, up 2.6% from a year ago when H.J reported earnings of
78 cents per share.
The consensus estimate remains unchanged over the past month, but it has decreased from three
months ago when it was 82 cents. Analysts are expecting earnings of $3.52 per share for the fiscal year.
Analysts project revenue to fall 0.3% year-over-year to $2.84 billion for the quarter, after being $2.85
billion a year ago. For the year, revenue is projected to roll in at $11.82 billion.
The company has seen steady earnings for the last eight quarters, but income has been sliding year-
over-year by an average of 7.3% over the last four quarters. The biggest drop came in the most recent
quarter, when profit dipped by 21.7%.
Most analysts think investors should stand pat on H.J, with eight of 16 analysts rating it hold. Analysts
have grown increasingly optimistic about the stock in the last three months. The stock price has
increased from $53.59 on May 29, 2012 to $55.51 over the past quarter.
"
Source: http://www.forbes.com/sites/narrativescience/2012/08/24/forbes-earnings-preview-h-j-heinz-3/ 3
4. WRITER=MACHINE,
DATA=PUBLIC
• The writer is a specialized Natural Language Generation Software
• The data is publically available
• It was “written” over 2.5 years ago!
- Natural Language Generation has progressed since then.
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5. AGENDA
1. Concepts – “Big Data” approach
2. Processes – Comparing traditional to Big Data
3. People – Getting the right skills and experience
4. Technology – What are the choices and what to consider?
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7. *Includes machine learning and deep learning
Descriptive Analytics
What is happening
Confirm
Hindsight
Analytical
Technique
Outcome
Process
Traditional Approach
Form
Theory
Observe
Data
Diagnostic Analytics
Why did it happen
Predictive Analytics
What is likely to
happen
Form
Theory
Foresight
Big Data Approach
Observe
Data
*Identify
Pattern
Prescriptive Analytics
What should I do
about it
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9. Traditional Approach Big Data Approach
Volume
Fewer sources – just store everything we need
to make the decisions of today
Large number of sources – store everything for the
questions and decisions you are yet to think of
Velocity Managed changes done infrequently Changes done constantly – crowd sourced
Variety Structured – internal/external Structured – internal/external, Unstructured – external
Veracity
Source Level – e.g. this is the
“source of truth” for FTE, perils, crime etc.
Data Level – e.g. number of sources of FTE data with
certainty scores for each
Feedback
Manual cleansing from fewer people –
scholarly “encyclopedia approach”
Crowd sourced or via machine learning algorithms –
“Wikipedia Approach”
Visualizing Graphs, tables, one way reports Alerts, graphs, interactive applications
Examples
Policies, Quote, Claims, Billing
RiskMeter, D&B, Pitney Bowes, Lexis Nexis,
Verisk
All of traditional data + LinkedIn company profile,
Facebook, Twitter, Yahoo BOSS, Google Search,
Urbanspoon, Yelp, Glassdoor
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11. Traditional Approach
• Subjective
• Non-auditable, paper based
• Time consuming
• Ineffective
• No learning
Big Data Approach
• Objective
• Auditable, electronic
• Fast
• Effective
• Learning
Underwriters
manually enter
multiple queries to
search dozens of
sources
to begin the
diligence process
30-60 min 30-60 min 16 min 30 min 20 min 20 min
OFAC
PEP
RCA
Media
Internet
SEARCH AGGREGATE SELECT REVIEW RATE QUOTE
Low Value High Value
Underwriters
compile content
associated with
the subject of
investigation
Underwriters
subjectively select
which associated
information to
review, articles to
read, etc
Underwriters read
articles and learn
about the subject
of investigation,
Identifying
potential
risk associated
with the subject
Underwriters
designate certain
Information /
findings
as risky based on
their review
and draw
risk-based
conclusion about
the subject
Underwriters
report
on their findings
using document
templates and
boiler
plate language
Culling internet
search results
Misspelled
names
Subjective
decision
making
necessarily
results in
incomplete
reviews
>70% of Underwriting Time <30% of Underwriting Time
30 min 10 min <1 min
<5% of UnderwritingTime <95% of UnderwritingTime
10 min
SEARCH AGGREGATE SELECT REVIEW RATE QUOTE
Underwriters
designate certain
information/
findings
as risky based on
their review
and draw
risk-based
conclusion about
the subject
Underwriters read
articles and learn
about the subject
of investigation,
identifying
potential
risk associated
with the subject
OFAC
PEP
RCA
Media
Internet
Culling internet
search results
Misspelled
names
Subjective
decision
Making
necessarily
results in
incomplete
reviews
Low Value High Value
Configurable
report
Generation
and
Integration
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13. SEARCH AGGREGATE SELECT REVIEW RATE QUOTE
Media
Structured Data
Unstructured Data
internet
Universeofavailableinformation
Red flags
missed due
to human
limitations
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15. Traditional Approach Big Data Approach
Hypothesis If I get a view of all the drivers, all the trucks
and all the equipment hauled, I will have the
right information to underwrite and
eventually rate.
Fatigue is the leading cause of fatal crashes for long haul
trucks. Vibrations transmitted from engine beneath the
seat is the main reason for this. Preventing fatigue is the
key to a lower loss ratio and improved driver safety.
Leading
Questions
1. Have you ever been declined or had your
insurance coverage cancelled or non-
renewed in the past three years?
2. Is there a vehicle maintenance program
in operation?
3. Does the applicant obtain MVR?
1. Have you ever been declined or had your insurance
coverage cancelled or non-renewed in the past three
years?
2. Are all trucks fitted with seat dampeners?
3. Does the applicant obtain MVR verification on drivers?
Outcomes Dismiss good risk and missed chance to
institute loss prevention programs
Uncover good risk and drive good risk management within
clients
A lot of manufacturers publish the vibration data for the type of trucks. With big data search you can
actually get this once you know the vehicle schedule!!!
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17. Traditional Approach Big Data Approach
Skills Actuarial, Business Analysis, Accounting,
Defining Data, Defining Data Relationships
Natural Language Processing, Artificial
Intelligence, Software Engineering, Search,
Experimenting with Data
Experience Common to find with 10+ years in insurance Rare to find professional with more than 3
years of experience
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BI / EDW Professional Data Scientist
18. BIG DATA TOOLS
ARE MATURING -
THE TIME IS RIGHT
TO EXPERIMENT
Tools that were traditionally IT related are now available to mainstream business
users – remember making webpage used to be an IT job!
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19. Traditional Approach Big Data Approach
Statistical
Packages
R, Julia, Matlab  Is your team based on a statistical background or IT/data
science background?
Databases Hbase, Cassandra, MongoDB,
Google BigTable
 Are you looking at transaction (Billing) vs. documents
(Underwriting)
 Do you want it real time?
 Do want it in-premise or in the cloud?
 Do you want to pay licenses or maintenance?
Languages* Pig, Hive  Is your team familiar with SQL (working with databases) or
writing procedural (Excel Macros)?
Visualization Pentaho, Tableau, Google  Do want it in-premise or in the Cloud?
 Do you have a insurance DWH?
 How structured is your data?
 Do you want to geo-overlays?
* Assume Hadoop/ HDFS has been installed
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22. KEY
LEARNINGS
• Big Data means re-thinking your approach to data processing
- You may only know about a part of the problem you will solve up front
- The data may show additional problems and answers
• Re-look at how and when data is used in the underwriting process
- With Big Data tools you can speed up and uncover additional risks
• Are you asking the right underwriting questions?
- Ask less and more pertinent questions and pre-fill information
• Look outside of insurance to build your Big Data team
• The technology is evolving rapidly – start experimenting early before
the competition gets far too ahead
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