Data is gold dust in today’s insurance industry. In recent years, artificial intelligence (AI), machine learning and big data analytics tools have cast the industry into a haze of gold, delivering exponential business value through data insights.
However, the term ‘haze of gold’ is quite apt in the case of many insurers. Lots of organizations have huge amounts of data at their fingertips but not many have the ability to see through the haze with clarity around how to turn that data into value, and how to do so in a compliant fashion.
Mayer Brown attorneys Dan Masur, Brad Peterson, and Donald Moon recently co-authored a chapter on “DOs and DON’Ts for Big Data Analytics” in Mayer Brown’s new handbook, Technology Transactions: Thriving in an Age of Digital Transformation. The attorneys list nine key considerations for firms in order to best leverage the power of data analytics.
“At Mayer Brown, we view data as a fundamental source of value,” said Peterson, partner in Mayer Brown’s Chicago office, and leader in the firm’s Technology Transactions practice. “We’re starting to get clients coming to us identifying data as their most valuable asset, but expressing concerns about how disorganized, inaccessible and potentially non-compliant their data is.”
The question is: How can insurance firms successfully capitalize on big data without landing themselves in damaging lawsuits? Compliance and contractual obligations are key.
“Big data can sometimes be scary and of course it comes with challenges,” commented Masur, partner in Mayer Brown’s Washington, DC, office and leader in the firm’s Technology Transactions practice. “In the past, insurers have traditionally spent relatively little time focused on the terms in which they’re obtaining data.
“New guidelines and pressures around compliance and the protection of personal information requires insurance companies to focus much more attention on their terms and conditions around how they collect data and whether they have sufficient rights to use it for the purposes they intend to.”
Compliance requires hard work and a lot of due diligence, especially in today’s ever-consolidating insurance industry. Mergers and acquisitions (M&A) are hot right now, with insurance firms eyeing ‘banding together’ as an effective solution to thwart industry disruption. But, as companies join via M&A and collate their data into one massive pool, the haze of gold can become even more opaque.
“The data challenges that come with M&A have been a bane of the insurance industry for many years,” Peterson told Insurance Business. “Consolidation means taking on different policy or insurance management systems, which are unlikely to have compatible data. Combining two systems together often results in answers that aren’t quite right, and when you then apply data analytics to the aggregated data, the insights could create regulatory problems.
“We recommend insurance companies to be M&A ready. By that we mean building systems that are widely compatible, keeping data clean and organized, and making sure they have rights to access the data on their systems. Acquirers doing their due diligence will require firms to prove their data compliance and show that data is formatted in a way the acquirer can easily take on.”