The Data Solution Selection Conundrum, Part 1

The Data Solution Selection Conundrum, Part 1

Satyen Paneri

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Data Solution Selection Conundrum

Data is the lifeblood of the property/casualty (P/C) insurance industry. Data is not only used to support core operations across insurance policy administration, insurance billing software, and insurance claims solutions, but also to monitor the business and fulfill statutory and regulatory requirements. Every part of the business captures data, translates it, enhances it, and analyzes it. Data usage by P/C insurers includes, but is not limited to, actuarial modeling, underwriting risk analysis, pricing, new product development, fraud detection, agent compensation, marketing, cross-selling, customer profitability analysis, reducing customer churn, and workload optimization. Managing and leveraging data in an optimal manner can help drive customer centricity, support innovation, and improve operational flexibility. Evident with the ‘lifeblood’ analogy, data does not reside just in core operational systems. Data needs to easily move between all systems to deliver on its promise.

Ask any P/C insurance CIO about “hot topics and technology trends” on their mind and you will get the same answer – social, mobile, digital, cloud, analytics, big data, and Internet of Things (IoT). Data is the single common enabler for all these drivers of business transformation and P/C insurers recognize that leveraging internal and external data as well as big data is the key to improving their business performance. As CIOs push their departments to deliver on the data promise to business, they also have to support and manage ongoing core systems transformation initiatives. In today’s consumer-centric and highly competitive business environment with rapid changes in technology, delivering on both of these initiatives can be a major challenge.

P/C insurers often choose to go with a single large vendor that provides modern policy, billing, and claims systems to replace their current legacy systems. A single vendor choice provides end users with a consistent architecture and data model, process integration with built-in industry best practices, and a common user interface. A single vendor choice is not only a risk-averse decision but also reduces procurement complexity and cost of ownership over time. However, when it comes to business intelligence, data warehouse, and advanced analytics, P/C insurers have a wide variety of choices from best-of-breed horizontal providers as well as core systems providers. In today’s cloud computing, subscription pricing, and API economy end-users can really benefit from best-of-breed solutions that typically deliver more comprehensive functionality, flexibility, superior user experience, and faster innovation.

Hence the conundrum…

Guidewire’s mission is to help customers adapt and succeed with our software products. Customers embark on a core system transformation journey in order to achieve significant and necessary improvements in customer service, business agility, and operational efficiency. Core systems transformations typically come with some corollary challenges – a major one of which is managing the operational data stored in the legacy and the new core systems. This is because the core systems comprise a large proportion of the data being fed to the customer’s data warehouse. That means that the (large) core systems project initiates a parallel (large) data warehouse project. Running these two large dependent projects creates business risk. Often the cost and resource efforts for such transformation projects are underestimated. This data management challenge is one of the top risks associated with business transformation. In part 2, I will discuss what the right insurance data solution looks like.