Being a data driven organization: What does this mean at Allianz?

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From calculating risks and premiums to understanding customer behavior, data is of vital importance in the insurance business. Allianz, a multinational financial services company that focuses on insurance and asset management, has recently transformed its operations on a data level to reinvent its insurance business. Read an extract from a recent conversation between Sudaman Thoppan, Regional Chief Data & Analytics Officer at Allianz Benelux & Global Data & Analytics Tribe business sponsor, and Wilma Liebenberg, Insurance Partner Data & AI for the Benelux at IBM Consulting, about what being a data-driven organization means at Allianz, the challenges data driven organizations face, and how to overcome them.

Strategic challenges in the insurance sector

Wilma Liebenberg (IBM): Before we turn to data, can you explain the strategic challenges the insurance industry is facing?

Sudaman Thoppan (Allianz): Let’s put data and AI to one side for a moment and look at what’s happening around us. We – as individuals and customers – are changing. Insurance is highly correlated to the customer’s behavioral patterns, which means that as the market changes, we have to consider changing the products that we offer.

There are changes on continuous and ad hoc basis that present business opportunities.  As the business is looking growth, they look for the opportunities in a changing environment.    When these opportunities present themselves, we revisit our processes and support them with Data & AI to make it optimal.

Data is critical when it comes to interpreting current trends and changes and making predictions about the future. However, data is disrupting the insurance industry, leading us to change our culture, habits, and processes. For example, we used to only get revenue from premiums. But now,  as other services and advice are offered, these are giving us alternative revenue streams.

Data strategy embedded in the business strategy

Wilma Liebenberg: In other words, when we look at the core of the insurance business, we find data which is used to support the promises that you make to your customers when you insure them. And as data is the biggest business asset an insurance company has; it is vital that your business strategy is aligned to your data strategy.

Sudaman Thoppan: Actually, we prefer to embed our data strategy in our business strategy instead of simply aligning the two. And, of course, our business strategy follows the needs of our customers. We also use data to measure the outcomes to see how well we deliver on the promises we make. This means answering a different set of questions: what information do I need to have to be able to accurately measure our outcomes? And, when I have this information, how can I continuously improve my ability to deliver this service to my customer?

Wilma Liebenberg: Exactly, your data strategy informs and supports the organization, tracking the value of innovations and change. This value metric is extremely important for sustainability, as you cannot manage what you cannot measure.

Sudaman Thoppan: Yes, at Allianz, we worked hard to establish a stable and sustainable MII (Management Information and Insights) that gives us insights on sales, distribution, pricing and underwriting performance amongst others. It is essential that organizations that want to extract value from data first look at their information environment and see if it has any health issues before attempting to build on it.

Sudaman Thoppan, Regional Chief Data & Analytics Officer at Allianz Benelux & Global Data & Analytics Tribe business sponsor

Allianz, a data and outcome driven organization

Wilma Liebenberg: Getting the basics right is vital for becoming a data-driven organization. There needs to be a shared understanding across the organization with the right structure and responsibilities in place because we build up from these basics.

One key element that I frequently hear concerns quality of data: how you organize and govern your data is key. And this must be aligned across the entire organization for it to be effective. The opportunity cost of not being aligned in terms of strategy, governance, and framework can be huge, as it means the organization is not all moving in the same direction. By aligning upfront, by ensuring everyone is speaking the same data language, and by tracking, monitoring, and measuring, you generate trust. Plus, you also create opportunity to foster innovation because the entire organization is behind it.

Sudaman Thoppan: In my experience, data driven organizations use data as their first resource, which leads to decisions being made in a multifunctional way. To give an example, in strategy meetings, instead of rediscussing the strategic objective, we look at the output of activities engineered and designed to deliver the objective. We look at this with a lens of what did we know and what do we now know. What we want to achieve totally depends on constantly evolving “what do we know” and realigning our activity plan to match the new information that has emerged. This way of working has led to a change in our ecosystem, with our new data culture becoming key to ensuring the business strategy is followed.

I’ve noticed that Allianz, as a data driven organization, is outcome driven. There are concrete differences between input, output, and outcome, where your KPIs are output, but your outcomes are the real impact you create in the market. We use a strategy to the outcome (or execution) framework that measures our outcomes, which I shared during the IBM Think event. In fact, at the start of every project, we detail the changes we expect to see in our target customers. It is not always straightforward to measure these outcomes, but just having the discussion helps us to prioritize product features to be customer – centric and even hyper-personalised.

Data and the future of insurance

Wilma Liebenberg: Innovation is my favorite topic when it comes to business: thinking about the future, reinventing, and re-imagining business. So, what does the future hold for insurance and what role will data have to keep you at the forefront of the industry?

Sudaman Thoppan: While there is a lot of innovation happening around the technology and data side of the business, there is still work to do to incorporate data further in our business model. Data has already significantly reduced the cost of prediction, but the cost of human value judgement has increased. We need to educate our businesspeople more about the huge paradigm shifts that are happening thanks to technology, innovation, and data. Innovation needs to become a business topic.

Wilma Liebenberg: This is exactly how we support our customers at IBM. You need a sustainable and robust framework to encourage innovation. Innovation is all about continuous building, learning, and reinventing yourself and your organization to fully understand what is possible. Education is key to this.

I’ve noticed that some organizations are held back by their legacy systems and the risk they accumulate as they expand, even while they try to mitigate that risk. This makes it difficult for them to understand the capabilities of modern technologies and the benefits they bring. In this case we find ways to showcase how organizations can overcome their legacy. This starts to build trust, which allows innovation to happen. We need to encourage a disruptor or startup mentality to stimulate the development of innovative ways to tackle existing problems, for example by using technology to take business to the next level.

Sudaman Thoppan: This is exactly what we did at Allianz. We didn’t throw people and money at innovation, we created financial constraints that forced people to think outside the box and develop a startup mentality. What is important, is that we don’t do proof of concepts. Instead, we want to create value by embedding innovation in business initiatives.

Value creation thanks to data and predictions

Wilma Liebenberg: One thing about data driven organizations is their exponential value creation. By focusing on your existing business, you can use data to better understand value pockets and their response to your business strategy. Do you think that exponential value creation could change the game itself in parts of your business?

Sudaman Thoppan: Absolutely, as an example fraud is the most customer-centric thing that insurance can deal with. To give an example, a decade ago the cost of copper was skyrocketing. This was quickly followed by high claims from home rewiring. It meant that they were taking the copper from the wire, selling it, and then claiming for rewiring. We now have the capability to predict the impact of a particular price increase on the behavior of our customers. This is predictive fraud fighting at its best.

A more recent example concerns the Belgian decision to demolish properties if the soil underneath them was completely decomposed based on the composition and geological framework. If you have all this information beforehand, you have a competitive advantage, and the value creation is super exponential. By telling your customer not to buy affected properties, you proactively protect your customer. There are many initiatives like this. They might not be easy, but they are important. Just because something is complex, doesn’t mean it’s not worth doing.

Wilma Liebenberg: Thank you for sharing your experience.

IBM has a long and trusted relationship with Allianz Benelux successfully delivering many projects and services. Current projects for the Data Office include Underwriting for Mid-Corps and BI reporting. IBM has recently been selected as the single partner of choice to support Allianz on the operationalization of all its key data products with the ambition of supporting the business goals of Allianz Benelux for 2022 and beyond.