The role of the chief information officer has changed in recent years in just about every field. Innovations such as the cloud and BYOD have made it possible for CIOs to spend more time on strategic planning and fewer hours keeping systems up and running. In the insurance industry this fundamental shift is empowering IT leaders to focus on the new and burgeoning practice of data analytics. Executives and analysts who are used to actuarial tables and Excel spreadsheets will look to their CIOs as ambassadors from the strange new world of big data—and will expect them to deliver a swift and painless marriage of legacy systems and digital power.
As an insurance CIO, it’s your job to leverage the robust potential of analytics to drive revenue, control costs, and mitigate risk—and to do it better than your peers at competing payers. To achieve operational excellence you need to know how to harness new innovations to gather broader, smarter, and more precise data. If analytics is all about predicting trends, executives who can see the potential in new tools like the cloud, smart wearables, and the Internet of Things (IoT) to enhance data analysis will have the best chance of guiding the insurance industry into the future.
You are What You Wear
The field of analytics is already overflowing with data (according to data expert John Bates, humanity is collecting enough information to fill the Library of Congress every 14 minutes). But until just recently, this has mostly been gathered by tracking, browsing, shopping, and usage information, essentially tracking results rather than causes, analyzing results, not roots. In health care alone, the advent of smart wearables like the Fitbit has opened up whole new ways to gather information on wearers’ moment-to-moment health to proactively monitor vital signs and encourage healthy living while gathering absolutely enormous quantities of data. This lets payers gather a much more complete image of the healthcare habits of both individual wearers and populations. 20 percent of Americans own at least one wearable device, and the number will only climb worldwide over time, drastically increasing the breadth and depth of collectible data.
"People often wonder what would happen if “these walls could talk,” but thanks to innovations like Siri and Alexa we are pretty close to that becoming a reality"
The amount of data to be gleaned from a user’s wearables is limited only by how much information can be monitored and collected. Referring once more to healthcare, an item like a smartwatch could be enhanced to keep tabs on heart rate, blood glucose levels, blood pressure, body temperature, and more, including how various readings fluctuate throughout the day. And this doesn’t even account for cutting-edge items like smart ingestibles to monitor organ function or smart contact lenses. Consumers will use these kinds of devices for the added safety and aid they provide, and the data that is collected will help form a clear and actionable body of data to improve insurance practice worldwide.
This House Can Talk
People often wonder what would happen if “these walls could talk,” but thanks to innovations like Siri and Alexa we are pretty close to that becoming a reality. What would the items we use every day say about us if they could? As our world becomes more and more interconnected and everything goes online, this question is swiftly ceasing to be rhetorical. The Internet of Things is transforming how we link the items we use to better track, automate, and regulate the tasks those items perform. We are only a few years from the science-fiction dream of the smart house that knows everything about its occupants’ routines and creature comforts (it’s no accident that Google spent billions of dollars acquiring Nest, a smart thermostat), and we’re already past the birth of the self-driving car.
But connecting devices online does more than allow parents to automatically order juice boxes after the kids have raided the fridge or record their favorite TV shows. As our appliances, computers, phones, toys and other household items gather data on their users, they aggregate information that can easily be sent to the users’ insurers to perform the sort of data mining that can easily create an ideal insurance plan and help payers develop new programs to help control costs and improve health outcomes.
Take those self-driving cars and even their smart-car cousins. A vehicle can collect millions of bytes of information, from the speed of traffic to the frequency of police on the roads to the condition of the roads themselves. A smart car can track the driver’s habits and help their insurers customize plans that enhance safety and reward responsible driving. By 2020, the IoT will include 25 billion connected items and soon 92 percent of everything we do will be in the cloud, creating an embarrassment of riches for CIOs who stay ahead of the data curve.
Insurers should absolutely make data mining a conscious opt-in where users reap benefits for their participation without intrusive and illegal information collection protocols. A homeowner who uses their appliances responsibly has every reason to let their property insurer know it. A healthcare insurance buyer can use their wearable to lead a healthier lifestyle, improving their quality of life while justifying lower monthly payments.
Payers who offer these kinds of programs will drive revenues as they attract policyholders who want coverage that maps to their personal habits rather than a statistical mean. There’s a big difference between a 45-year-old man who runs 20 miles a week and a 45-year-old man with the local KFC on speed dial. Data gathered—and personalized—this way will drastically lower risk as CIOs develop systems that recognize widespread patterns and use this information to improve their key processes and improve overall results.
The most important thing to understand about all of these innovations is that they have already arrived and are already being used by forward-thinking CIOs who are looking for every possible advantage to improve outcomes. Just as the companies that first embraced big data had a noticeable edge over their competition, payers that figure out how to best integrate wearables, the IoT, and whatever wonderful new invention our digital age rolls out next will have a clear advantage in the crowded and competitive insurance industry.