Better late than never. Long lambasted as a technology laggard, the property/casualty insurance industry appears to be following the lead of other financial services companies like banks, accounting firms and stock brokerages in appointing two new “chiefs,” albeit both with the unfortunate acronym of CDO.
We write “unfortunate” only because the two new members of the C-suite—the chief data officer and the chief digital officer—perform very different functions. The former is focused primarily on the use of predictive data analytics, while the latter looks predominantly at digital marketing and other digital strategies. In a few paragraphs, we will outline the full functionalities of these new roles.
What is interesting is the rather large number of insurance carriers that have announced the appointments of one or both positions in the past two years.
Why are so many carriers making the appointments? Are they just lemmings following a leader, or is there a strategic rationale for creating the C-suite positions?
Answers from industry experts tend toward the latter—the acute realization among many insurers that they simply had to enhance their understanding of data analytics and the digital ecosystem we now live and work in or risk competitive dislocation.
This realization certainly occurred with regard to the need to appoint a chief data officer. “Suddenly carriers came to the mass conclusion that they needed to better handle and manage their data assets,” said Marc Zimmerman, director and co-lead of the financial services analytics and information management solutions team at Deloitte Consulting. “They realized like banks that immediate access to data was critical to their decision-making, and this needed to be well-governed and managed at an enterprise level.”
By entrusting these responsibilities to one person in a leadership capacity, a chief data officer, companies can rest assured, well, better assured, that these demands are being addressed and met.
“Every CEO and board of directors knows that data and information are king,” said Robert Hartwig, president and chief economist at the Insurance Information Institute. “It’s a ‘dog eat dog’ world with respect to which organization applies the best analytics to this data. Consequently, insurers have to be on guard to protect their territory, which means moving rapidly to protect their ownership of information.”
Otherwise, “there is the risk that data will be collected out of an automobile by Mercedes, which transmits the information to Google to analyze it,” he explained. “If this happens, the role of the insurer could be reduced to simply a provider of capital.”
The same competitive realities also drove the realization among many carriers that they needed to appoint yet another C-suite leader—a chief digital officer.
“Property/casualty insurers realize that the digital channel is important to their engagement with policyholders, prospects, distribution channels, and brokers and agents,” said Arun Prasad, principal, financial services, insurance technology, at Deloitte Consulting. “The digital channel is also vital to each insurer’s brand expansion. Carriers cannot ignore the digital channel, not with smartphones and other mobile channels of communication outpacing all other media platforms.”
Like Hartwig’s estimation of the potential for insurers to be disrupted by other industries that acquire insurance data, Prasad echoed similar concerns over the dislocation of insurers by businesses with a leg up in the digital domain.
“Insurers subconsciously realize the possibility of external disruptors like technology companies with powerful digital capabilities coming into the business with better ways of engaging these stakeholders,” he explained. “The CDO is a critical role to ensure that the insurance carrier has these capabilities first.”
Nontraditional Skill Sets
Both CDO types comprise individuals with skill sets that are very different from traditional insurance industry talent. Chief digital officers, for instance, tend to be people who have a foundational understanding of the digital domain. They appreciate how to create effective engagement with customers and other stakeholders across different media platforms, such as social media and mobile marketing to a customer’s smartphone and tablet.
Many CDOs of the digital stripe are new to the insurance sector, having run digital operations at other industry verticals in the past. Others have served in a marketing capacity at an insurance company but have significant knowledge of digital products and service.
Darryl Siry, chief digital officer at ProSight Specialty Insurance, exemplifies this profile. Siry, a former chief marketing officer (CMO) at Fireman’s Fund, left the company to launch NewsBasis, a software services business. He then left that company to become CMO at ProSight before becoming CDO last year.
The skill sets of Steven Zuanella, appointed chief digital officer at Zurich Insurance Group in March 2015, also emphasize long stints in leadership and management capacities, especially roles that have a customer focus. Zuanella previously was responsible for global digital planning at international healthcare provider Bupa. Prior to that, he worked in the banking industry developing the digital capabilities of such firms as Barclays PLC.
“The most important skill that a CDO must have is not technological or even marketing; it’s to come from a place where you are always looking at things from the customer’s perspective first,” Siry said. “Everything you do as a carrier derives and extends from this perspective.”
As an example, he cited the many consumers today who have clearly indicated that they prefer to use their mobile devices to access information and conduct routine business transactions, anywhere at any time. “This now becomes fundamental to your business,” Siry explained. “In many cases, this requires a transformation effort, since many insurers are set up the ‘old way’ from an IT standpoint, which was very internally focused.”
Change management is not easy, however, certainly not for insurance companies that have been underwriting, managing claims and distributing their products the same way for centuries. But it is nonetheless necessary. Over the past year, this message has sunk in for many carriers.
“If you talked to a bunch of insurance CIOs (chief information officers) three years ago, they would see their jobs as serving the needs of the internal business,” Siry said. “If you were to interview many of them today, the more sophisticated ones would say that their job is to create digital strategies enabling better experiences for customers, such as a better website or agency portal.”
Zuanella shared this perspective. “The digital piece has been on the agenda of financial services organizations for some time, but the insurance industry was not at the front of this wave and has been playing catch-up since,” he said. “My responsibility here is actually pretty simple—to drive digital transformation throughout Zurich.” (He means the insurance company, of course, and not the city.)
Both CDOs said that an understanding of IT is important to their roles but is not the central skill. “Honestly, technology changes so quickly you need specialists to stay on top of it,” Zuanella said. “This function grapples instead with strategy and product delivery, investing in these areas to make a difference.”
Siry agreed. “Five or six years ago, no one was designing systems for a four-inch-diagonal phone screen,” he said. “The entire world of systems, especially in the insurance industry, assumed a desktop paradigm with people interacting with you via a web browser. Mobile blew this out of the sky.”
Both CDOs are right, of course. Today, all of us search for information using our smartphones or to a lesser degree, our tablets. We conduct transactions like signing documents, transferring money from one bank account to another and booking travel on dozens of different mobile applications. When we want fast answers to questions, we text people or verbalize our needs to our phones’ personal assistant. We’ve also come to expect deals from our phones, mobile messages promising 10 percent off a burger at a fast-food joint off the next ramp while we’re driving to meet a client, just when we were thinking about lunch.
This instantaneous world of information, communications, business dealings anddirect to ME services prevails in so many industries; for it not to be firmly in place in the insurance industry makes carriers appear out of touch. To put it in place requires someone who has done this before to build the proper infrastructure—hence the appointments of the chief digital officer.
“By and large, the CDOs in the insurance industry have general management experience and broad expertise across multiple domains,” said Deloitte’s Prasad. “But their most important attribute is the appreciation for change management, which needs to occur for the organization to leverage the digital space.”
The Other CDO
The skills of chief data officers also are not purely technological in scope, although knowledge of IT is an important trait. Like chief digital officers, chief data officers are leaders with broad experience, in their case of a more scientific bent.
“They’re very different from a CIO or CTO (chief technology officer), although we sometimes see the function placed within the IT structure,” said Zimmerman. “The CDO’s job is to have a technical, domain view of the world, with the best candidates being those who’ve worked on the business side. They have the operational expertise to understand how data flows, as well as the tools to consume and manage this information. In many ways, they enable the business side and IT to work together better.”
His point resonates. The language of business is different from the language of technology. Unlike a CIO or CTO that is focused on the use of technology for internal business purposes, the CDO has a deep understanding of the business strategically, as well as the needs of business users for accurate and insightful data to achieve strategic goals.
Fitting this profile is Gina Papush, chief data and analytics officer at QBE Group. Papush is a mathematician and statistician by training who has spent her career in the data sciences and analytical fields. She has worked in this capacity across multiple industries, including financial services, consulting, retail, healthcare, pharmaceutical and entertainment. The people on her team, such as Laura Rinehart, head of data strategy and standards, have a similar background.
“Our focus is on enabling business growth and improved operational effectiveness through analytics, enhanced data management, quality and accessibility of data,” Papush said. “We also ensure that appropriate controls are in place to govern data from a regulatory requirement standpoint. But our primary focus is how to apply the insights we derive from data and analysis to making better decisions, which then result in better business outcomes.”
This task involves the application of data analytics to the entire insurance operations at QBE—from sales, marketing and distribution to underwriting, claims management and customer service/experience. To do this, Papush and her team work diligently to ensure that the right data is accumulated across the business and treated consistently using consistent standards and platforms.
Similar goals are in place for Brian Bissett, chief data officer at XL Catlin. “Our job is to exploit the onset of the digital age to find business opportunities that otherwise might have been squandered,” said Bissett. “In this regard, we help users talk the same language when it comes to data. We also ensure that data is accessible to users for business purposes.”
A topnotch CDO doesn’t just provide insights from the data to business units and functions, managing the demands of the day, Bissett said. “A CDO also must always have one eye on the future, anticipating the next set of insights that will be called upon for the benefit of the company,” he added.
Making a Difference Slowly
Both CDO types have different reporting requirements, although in the four examples provided none of the CDOs reports to a technology head like a CIO or CTO. Rather, they tend to sit alongside other members of the C-suite, interacting with the CMO, CIO and CFO on an equal or near-equal basis while reporting directly to the CEO and/or the COO. Obviously, no two insurance carriers’ operating structures are the same, so this is a sweeping generalization.
The post also is a new one in the industry. Four other carriers that were asked to participate in this article declined the opportunity, explaining that they were not yet ready to publicly divulge their digital or data and analytics strategies. “This is a new C-suite position at insurance companies, and until the cake is fully baked,” Zimmerman said, “they may not be ready to display it.”
This reticence also applied to the on-the-record interviews. Each of the CDOs was asked to present a success story, but their narratives were too nonspecific, due to the proprietary nature of this work. QBE, for example, commented on the predictive modeling it was doing in the claims area, but as Rinehart said, “We’re expecting substantial business impacts, but right now we consider this to be competitive intelligence.”
Zuanella was equally cautious, commenting on his team’s work with an unnamed customer to deliver “a market-facing proposition” later this year that “will involve a huge change in our culture,” only to add, “We’re still writing the business case now and in a remote testing phase. That’s all I can share for now.”
Nevertheless, one does anticipate exciting developments to emerge from the new C-suite functions and the bright teams of people they’ve assembled from outside the insurance industry’s traditional recruitment pools. At last, the industry appears to be embracing what technology can do for it, making vital investments in the future before others beat it at this game.
“A huge part of the value chain of the insurance industry is potentially at risk unless insurers protect their data franchise,” Hartwig asserted.
The world of the Internet and mobile devices is producing an exponential increase in the flow of data, he acknowledged. “Historically, this data flowed solely to insurers,” Hartwig said, “but now other entities are dipping their toes in the water.”
If they dip in deeper, for many carriers it just might be sink or swim.
This article was originally published by Carrier Management.