How Data-Driven Performance Tracking Helps Risk Managers Take Control of Risk
Many companies have made great strides in leveraging data and analytics for various parts of their business, including helping them better understand their risk exposure in the marketplace, take control of their risk and build a compelling risk narrative for underwriters.
A comprehensive, data-driven approach to risk performance tracking can help companies identify potential areas for cost savings and overall performance improvement and become more outcomes focused. In hard insurance markets, performance tracking also helps companies develop a more compelling and data-supported narrative around their risk-management successes—one insurers need to hear.
A key to maximizing the business potential of performance tracking is having a thoughtful and creative program that helps companies connect tactical moves to strategic improvements. The following program components can help companies get more from performance tracking.
Track relevant metrics and think outside the box
Companies can now collect and evaluate significant amounts of data, which provide a multi-layered view of their loss profile. This includes everything from cause and cost drivers to detailed demographic data and indicators of claim-handling efficacy. To cover the breadth of possible uses, companies should be collecting as much relevant data as possible from a variety of sources.
Taking advantage of good, comprehensive data can lead to better solutions and risk management. Moving beyond the standard data capture to more proactive and creative approaches also positions companies well for a variety of situations and stakeholder conversations.
In performance tracking, data collection is one part of the equation—but tracking performance against designated metrics is key. Companies need to know which metrics and performance indicators actually demonstrate business impact. For example, in workers’ compensation, lost workday and cost metrics help companies better understand and plan for the impact claims will have on business. Important performance metrics could also include claim closure rates, litigation rates and claim reporting speed. Companies can take it even further by thinking about how the different metrics relate to one another. For instance, is there a correlation to elevated litigation rates with claim reporting delays? Connecting those dots helps companies manage the impact on their bottom line and improve their risk-mitigation strategy.
There’s also an opportunity to think outside the box when it comes to data collection. For instance, outside of the traditional fields associated with auto liability claim data, companies can also collect and correlate accident experience to variables such as the road and weather conditions, time of day, driver’s age, vehicle age and type, and motor vehicle records, along with dozens of other collectible variables to understand root causes of incidents. This allows for proper program enhancements or interventions directed at preventing or mitigating loss.
Create a narrative from the data
The most sophisticated companies have data storytelling capabilities—they can develop a clear and compelling narrative from seemingly disparate data points. That’s an important part of successful performance management, particularly in elevating the conversation with stakeholders and carriers. For example, in the hardening auto liability market, companies are finding it difficult to purchase insurance. To combat that, tracking the appropriate metrics and positive trends can show that the risk is being effectively managed, helping companies share a positive narrative with the markets. Performance tracking not only helps demonstrate the strength of a program but also provides a track record of outcomes. That can be just what markets need to positively differentiate your business from others and help the markets feel comfortable taking on your risk.
To achieve better data storytelling in risk, companies should evaluate their analytics capabilities and ensure that risk managers are providing the appropriate context and nuance necessary for a strong risk narrative. Too often companies rely solely on dashboards for insights and storytelling, but to engage stakeholders effectively, the narrative should be layered with the appropriate context. The story should have a clear beginning, middle and end—for instance, how a company evaluates and assesses risk; the actions they take in response; and what the outcomes are, including the reduction in claims or losses. By thinking of performance tracking as a larger narrative-building exercise, risk managers can be more strategic as they structure stakeholder conversations and information about performance, improvements and outcomes more effectively, with the appropriate insights and takeaways for their audience.
Analytics talent is likely to become more competitive as organizations aim to extract more value from their data, so companies should position themselves well to attract the right data storytelling skills. Upskilling and reskilling current talent is also important—it’s clear from workplace research, where analytics skills are in high demand in the hard skills category, that data storytelling will be competitive in risk as well as other functions.
Make appropriate technology investments
Capturing and aggregating data and conducting valuable analysis is made simpler and faster with appropriate technology. Companies should identify the technology investments that will help them strategically manage their data in a way that helps them pinpoint specific issues in each business unit, so they can allocate resources to maximum effect. An interactive dashboard tool that allows for both granular and high-level analysis can help data storytellers and risk managers draw more meaningful conclusions in a more illustrative and efficient manner, as well as better answer critical questions. For example, they can understand which pockets of their organization experience the most litigation and then dive deeper into drivers of litigation and costs at the business unit level. They can also use time dimensions to detail how performance is improving—or weakening—and quickly take actions such as applying successful performance characteristics to other parts of the organization. Clear, concise and compelling reporting can help risk professionals and business leaders from across the company get to the heart of issues quickly with a single source of truth.
To help identify which technology investments are likely to pay off for a company, risk managers, analysts and other stakeholders should collaborate on their needs and evaluate different platforms with specific use cases in mind. Risk managers, for instance, need a platform with a running data feed that allows them to continually assess risk from multiple angles, measure the outcomes of their mitigation approaches and other strategies, and support ongoing monitoring in other areas of the company. Analysts’ needs can fluctuate depending on the circumstance, but they need comprehensive and reliable data and connections to multiple interfaces and sources, customizable reporting, and visualization capabilities, among other, variable needs. Some platforms have more basic features, such as data processing and structuring, while more sophisticated platforms have machine learning and natural language processing capabilities, which can help organizations uncover insights faster. Ultimately, the steps to making appropriate technology investments involve collaboration, a defined set of needs and clear use cases.
Performance tracking has myriad proven benefits for managing the total cost of risk. Underpinned by best-in-class technology, sophisticated analytics capabilities and a robust data and management program, performance tracking creates more opportunities at the intersection of risk, cost management and business priorities.