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Actuarial Post: Whose data is it anyway?

Actuarial Post: Whose data is it anyway?

This article was originally commissioned for the Nov/Dec 2014 edition of the Actuarial Post.

There is a lot of talk about the effect of big data on the world of product retailing and how it is going to transform the whole sector. Mass retailers, such as supermarkets, are to the forefront of this charge expending massive amounts of time and money to analyse the data of their customers; tracking their purchases via loyalty schemes in an effort to get and retain customers and to make them spend more. Even smaller businesses are working hard to understand and track the spending habits of their customers in order to finesse their offering to them.

The same effort is required in the financial services sector. Unlike many businesses, the nature of the life and pensions industry means that we are in possession of a huge amount of data about our customers; perhaps not as much as the big supermarkets but a substantial amount nonetheless. This gives us the opportunity to mine that data to understand our customers better.

The nature of the consumer market for financial products is changing swiftly; increasing longevity is leading to huge changes in the pensions sector but it is also dramatically altering the needs of consumers in the life sector. Protection, critical illness, long-term care, equity release; these are all areas that are seeing significant transformation as the nature of people’s working and retirement lives change. With the needs of the public altering so rapidly, it is vital for the industry to respond just as rapidly if it is to be in a position to fulfil those needs.

As the supermarkets and the online industries have shown, monitoring the movements in the buying habits of their consumer base is key to understanding the needs of their customers and to predicting what those needs will be in the future. In the past, customer-driven product development has not been the area where the life and pensions sector has particularly sparkled but it is certainly where it needs to be focusing on in the future if it is not to lose market share to new entrants with more customer-focused ethos. Trying to remain relevant to the customer in a market that is being opened up by de-regulation is difficult enough, not to mention being in a market where the growth in lifespan is completely changing the requirements of the end-consumer.

It is, therefore, vital to be in a position to access all of your data and to mine and manipulate it in many ways to try to derive information, patterns and theories from it. A key part of being in a position to do so is having access to the data itself. Yet here we can frequently come up against a major problem. For many life and pension companies, the process of accessing their own information is through management information and business information provided by their systems suppliers that frequently have an extremely limited interface.

Some technology providers can feel that the underlying data structure is part of their IP and are reluctant to allow the purchasing life and pension companies to have a full understanding of it; for fear that they may replicate the system by building their own version. Some even retain control by providing a black box solution where there is no access to anything other than pre-defined GUIs and Interfaces. This is very limiting for the life and pension company who purchases the system as it effectively means that their own data on their customers is being fed out to them in a manner defined by the solution provider. This is truly a case of the cart leading the as the owner of the data is being constrained by the one who merely stores it.

Perhaps the problem stems from the side-lining of data during the system purchase process. The purchasing decision always seems to focus on the business processes of selling or administering the policies involved and never about the need to have full, unrestricted access to all the data about one’s own customers. And yet, without this freedom of access, full analysis of the information is almost impossible. No matter how flexible the interface appears to be, the fact that the database information, and how it is stored, is kept a secret by many systems providers inhibits the freedom of thought and action that is the key driver of discovery for those who are tasked with assessing trends of past and current consumption and who need to predict the future.

Big data is not just a current fad. It is the future of retailing and predicting future needs and all industries require the ability to utilise the data they have to ensure they stay competitive in the rapidly changing markets in which they are operating. Life and pension companies are no exception to this rule.

Future purchases of information technology solutions should weigh very heavily on the ability to access the company’s own data. It does not belong to the solution provider so the fact that so many of them retain control of access to this information is completely unacceptable and is likely to hobble the life company performance in the market. To be able to service your customers properly, you should purchase from technology providers who allow full access to the customer data and the rules under which it is held. It’s your data; make sure that no one else is blocking your access to it.

Actuarial Post is an online publication offering actuaries insight into the market, an extensive library, news and the latest job listings. With a dedicated comment section; the most talked about topics in the actuarial market are discussed by actuaries dealing with the issues on a daily basis. Articles focus on the latest trends changes in regulation and the areas of pensions, investment, life and insurance.

Tom Murray

Twitter: @TomMurrayDublin or @Exaxe

Google Plus: TomMurray

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