Move from big data to smart data is critical: State Street study

Insurers are looking to better utilize data and analytics to improve investment and risk management decisions, suggests a new study released Wednesday by State Street Corporation.

Based on a survey conducted by The Economist Intelligence Unit in April – involving 300-plus insurance executives from life insurance companies, casualty firms and diversified insurers – the study focused on major industry issues and how prepared insurers are to face those challenges.

Half of the respondents were in the C-suite level; the rest in senior management positions. The geographic breakdown of respondents was 36% from Asia Pacific, 26% from the Americas and 38% from Europe, Middle East and Africa (EMEA).

With the shift in how business is being done, the insurance industry must address how to leverage its investment in technology, suggests the study, Facing the Future: Blueprint for Growth.

In all, 75% of respondents report that using data more effectively across their organization is a challenge, with 22% citing it as a major challenge, notes a statement from State Street, which provides financial services to institutional investors. That said, 37% of respondents say they are evaluating a large-scale investment in IT systems within the next 12 months.

“Like many large, global institutions, insurers are starting to shift their technology focus from big data to smart data,” Joseph C. Antonellis, vice chairman of State Street, notes in the statement. “The nature of what insurers do provides a wealth of data, but it is clearly a struggle to harness that data to capture meaningful, actionable insights,” Antonellis points out.

Consider the survey finding that 84% of respondents say they have access to portfolio investment data that is accurate, but only two-thirds believe they have access to data that allows them to understand their total risk exposure.

“Technology is a vital enabler for insurers as they look to deliver on future opportunities,” Antonellis says. “However, disparate legacy systems will make various data and systems difficult to consolidate and analyze. A systematic and fresh approach to updating and properly leveraging these systems will be a key driver for this industry in the future,” he contends.

How to manage risk figures prominently in the insurance survey results, with State Street reporting Thursday that more than a quarter of surveyed insurance firms globally are experiencing difficulties in doing so.

Findings include that 29% of polled insurance executives report their companies have divested lines of business since the start of the financial crisis as a result of new capital requirements or risk management considerations. In addition, a quarter of EMEA respondents and 16% of respondents in the Americas say they have difficulty hiring knowledgeable, qualified risk management staff.

Add to this that 89% of insurance executives say improving assessment and pricing of risk is a challenge. Specifically, 93% of respondents in the Americas viewed this as a challenge compared to 89% in Asia Pacific and 88% in EMEA.

In light of the insurance industry’s shifting environment – including enhanced product design and changes in distribution channels – survey results highlight “risk management as one of the most pressing areas of challenge for industry leaders,” David Suetens, executive vice president and international chief risk officer at State Street, says in a statement.

“When adjusting their business models, firms must confront the resulting risk challenges to successfully adapt to this exciting new environment,” Suetens advises.