The Importance of Data Insights in the Insurance Industry Pt. 2: Growing Business

We recently sat down with Melanie Watkins, VP of Product Management for State Auto Insurance, to explore some exciting advancements in distribution solutions specifically with respect to commercial lines.

IVANS Communications: Melanie, please tell us a little bit about your industry background.

Melanie Watkins: I run our small commercial product for State Auto. I'm an actuary by trade, and so as we get into that today, I might dive into the data a little bit too much. But really, when I look at my background, I have a lot of history on the commercial line side, and specifically with numbers. I've been in a product role for about two years now and have about 15 years of experience in the insurance industry.

Getting Pricing Visibility Outside of Your Walls

IVANS Communications: Thanks Melanie. Part of IVANS’ long-term vision is to bring data insights that lift the entire network — independent agents, MGAs, insurers and ultimately, customers. One of the primary questions we hear often is “How do I get insights into commercial lines?”

Organizations have so many competing needs for understanding what’s going on across the industry with commercial. Needs like increasing the competitiveness of your products, the right demands for covering loss projections, regulatory needs for supporting data and so on. The thing is, all of this demand for insights is in an area that is more complex than personal lines.

Additionally, there are only like five to 10 million businesses to get insights from; you need a lot more data to be able to understand what’s going on across all of those different dimensions — industries, states and sizes of business. So where do you find that supporting data? You would definitely look at quotes that come in and the information submitted by your agents. But how do you expand that into new areas?

Practically every insurer and MGA that we’ve talked to is expanding into a new line of business, new set of industry classes or states this year and next. So Melanie, we’d love to know how you have historically evaluated your products and pricing against the broader industry.   

Melanie: Great question. Historically this has been very difficult and clunky. Commercial lines is in a difficult situation. Personal lines has comparative raters that allow you to see on an exact quote who you’re competing against and how you do on that exact quote. We’re not there yet in commercial lines. So while that is in the direction the market is going, it is still really important, even without that, to understand your competitive position.

If you don’t have comparative raters, what do you look at? You can look at close rate or hit rate. Of the policies you quote, how often do you actually close those? There are a lot of other factors that come in that aren’t just about rate. It could be something in your system, process, ease of doing business, blocking markets, or a whole host of different issues.

Digging in, close rates might be indicative, but they’re not really the end of the world. You have rate filings, but commercial lines adds a couple complexities. You can go look at what the base rates are in a filing, but companies apply IRPM, company’s models are proprietary, so you can end up with rates that are off by 50% from what that rate filing says. To get a handle on it, you’re trying to get as much information as possible, and that leads you down the third path, getting deck pages from your competitor of either the prior insurer or who you compete against.

I don’t think that is a pleasant experience for anybody. It is cumbersome to get, time consuming on the agency side, and time consuming on the sales side from the insurer perspective. Still, even with that, you’re not able to get much scale, and it takes a lot of work to dissect individual PDFs and understand what you’re seeing. As I mentioned before, my background is as an actuary and in data, so I always want more data but this is definitely an area that as a commercial insurer, we have struggled to fully understand our competitive position.

Understanding Products and Pricing in the Broader Context

IVANS Communications: You are definitely not alone. That is a familiar conversation and theme. We have yet to meet an actuarial or product team that doesn’t want more data; it is never enough. To that point, that was our impetus for developing out commercial alliance benchmarking, which gave life to our IVANS Benchmarks solution.

We started out in small commercial to help give that insight, and level the playing field so that you can see across the industry and compare what’s going on at your organization to the broader. The first line of business we launched was BOP back in May. We started there because small commercial is an area for which we have a lot of structured data and is also a key need for many of our partners that are rolling out small commercial products aggressively over the next year or two.

For our IVANS Benchmarks solution, which provides AI and machine-learning insights for commercial and personal lines policies, we took a data set consisting of millions or policies and billions of premium — the most comprehensive in the insurance industry — and developed 140 different industry models that predict premium for similar businesses.

Insurers can then take either their quoted premiums or bound premiums and compare that to the industry. Ultimately, we draw a picture of what’s happening in today’s world so you can understand, compared to the industry whether your prices are trending high or low and if that fits with what you expect to see. 

Melanie, could you share your experience with using IVANS Benchmarks?

Melanie: My biggest concern going in was it’s a model, its not just, “Hey, here are the other risks I’m being compared to.” How do I go and validate that I think it is correct? Then, how do I make assumptions and decisions off of it? As we went through the validation process, we had gathered a lot of other information, whether it be based off close rates we had, based on field intel that we had heard or even some of those painstaking PDF comparisons to prior insurer decks. We had a feel for where we thought we were competitive and where we weren’t.

With the IVANS Benchmarks data, we were able to get data at scale and compare that to what we thought we knew. In some cases, it disagreed with what we were seeing, but some of the common themes we were hearing aligned very clearly, showing us where the issues were and giving us ammunition to say, “Yes, this is correct.” For example, we had been hearing that we weren’t as competitive as policies got larger. We could see that in our close rates, but we know as policies get larger, there is more competition around them and trying to understand exactly what drove that is a big deal.

With the IVANS Benchmarks data, we were able to see exactly what the issue was, and very clearly saw that it was around building limit and exactly where that demarcation was. So with that we were able to identify the problem, go and make changes to our rating structure, and do something in the matter of a couple of months that would have taken us probably a year or so to gather that much data. It has not only given us confidence to make decisions but the ability to make decisions much faster than we would have before.

IVANS Communications: From what you’re saying, it sounds like a lot of the power is adding this — as a component — into the mix of data that you’ve already got.

Melanie: With an actuarial background, one of the things I have always tried to do is balance between what the data says ands what are other benchmarks you can look at to determine if the data makes sense. Close rates are a good example. Everybody looks at close rates but there are so many other factors outside of rate that impact that. How can you identify exactly what that is? So adding IVANS Benchmarks in as another component into our review has really helped us move faster and make better decisions.

IVANS Communications: Thanks Melanie, it definitely sounds like your organization has been able to make decisions that change the products. We love hearing stories and testimonials from people like you who know the business and take the insights given and apply them to make material changes that benefit your agency partners and the end customer, all while allowing your own business to grow.

If you’re interested in using data-driven insights to optimize pricing and market strategies, learn more about IVANS Benchmarks.

Marketing & Distribution, 2020, Carriers