Tag Archives: moneyball

Winning in a New Age of Insurance

Insurers have been masters of data for centuries. But the digital age has ushered in dramatic changes in the types and volumes of data available as well as the tools and techniques to extract insight and real business value from that data. Once the leaders in data-driven decisions, many insurers now find themselves behind the curve. They are aware of the promise and potential of these advances, but stuck in their traditional methods made up of silos of internal data and dated analytic techniques suitable for limited, repeated decisions but not capable of making new discoveries, optimizing business decisions or uncovering strategic opportunities.

In many ways, it is similar to the now famous story of the Oakland A’s in the book Moneyball: The Art of Winning an Unfair Game by Michael Lewis. Similar to insurers stuck in centuries-old business assumptions, Moneyball shows that the collective wisdom of baseball insiders, including players, managers, coaches, scouts and the executive office was subjective, flawed and did not keep up with a 21st century reality. Traditional data analytics (statistics in baseball terms) such as batting average, runs batted in and stolen bases were used to assess a player’s value and potential, and influenced baseball teams’ investments in and acquisition of players.

However, the Oakland A’s’ executive office, led by a forward-thinking data analyst and statistician, uncovered better indicators for success, such as slugging percentage and on-base percentage, that could be acquired and invested in more cost-effectively. While these new data insights contradicted long-held business assumptions and historical beliefs, they proved to be an organizational winner … helping the Oakland A’s assemble a competitive team that took them to the playoffs against teams who spent far more money on players.

Why is this relevant for insurance? Because we are in the midst of the shift from the information age to the digital age, realigning fundamental elements of the insurance business that require major adjustments in order to survive, let alone thrive. One of those adjustments is around data and analytics.

See also: How to Land on the Winning Side 

Mastery of Data and Analytics

Just like mastering the game of baseball with data and insights about your team and competitors, insurers must master data and a range of analytics to compete in today’s new age of insurance, particularly with so many Greenfields and startups “shaking up the game”. New Greenfield and startup competitors are the Oakland A’s of the insurance industry. They are rising from within and outside every industry, including insurance. They are capturing the post-digital age business opportunities of the next generation of buyers by leveraging new sources of data and using sophisticated analytics to reinvent insurance.

Insurers who stick to the traditional, pre-digital age formula of relying on internal, historical data used only for pricing and underwriting, will put their businesses at risk … both in terms of retaining profitable customers and in capturing new markets and new customers. Companies that make the shift to leverage new data and analytics are positioning themselves to be the market leaders in the post-digital age.  Those who do not make the shift, risk not only the loss of customers, but also market share and relevance in a new age of insurance.

Factors for Winning in the New Age of Insurance

Just like the Oakland A’s in baseball, in today’s new age of insurance there are some key winning factors … some old and some new. We look in depth at these factors in Majesco’s recently released report, Winning in a New Age of Insurance: Insurance Moneyball. Here are some of the factors we consider.

The customer. The next generation of buyers, Millennials and Gen Z, have a very different view of the world, how they expect to engage with companies and what they consider “value” for their money.  These and other factors are driving their view of “what is insurance” and when they need it — on-demand, short-period needs versus ongoing, long-term needs. While their views and behaviors underpin this shift, the breadth of new data makes these new products possible.

The talent. Just like in baseball, there is a fight for talent in today’s data and digital-laden world.  Many insurers are challenged by staff capability, the ability to source new talent, and management bias toward traditional business practices that restrict insurers from leveraging new data opportunities.

The market shift. A shift from risk products to risk prevention services is creating market changes. To put this in Moneyball terms, a walk is as good as a hit. Both put a runner on base. Risk prevention can provide new sources of revenue that will mitigate the decline of traditional premium revenue due to the reduced risk environment. This applies pressure on traditional insurance players by creating and offering innovations and alternatives for customers, which are often driven by data, to minimally match the competition in order to continue to win and keep customers.

The technology. Emerging technologies (including analytics) are creating new capabilities, and they are bringing with them an explosion of new data sources. New data contains unique insights regarding asset-related risks as well as consumer behavior, attitudes, and preferences. Insurance products and services of the future will utilize these insights extensively in design, pricing, risk understanding and consumer engagement. Can we use data to select and choose segments and niches that are missed by traditional product development philosophies? This is another Moneyball concept.

The analytics spectrum.  “Analytics” is a term with a very wide spectrum of definitions both within and across insurers, from Excel reports to cognitive computing and everything in between. Insurers require all the different types of analytics from the simple, informative “what happened” data analysis to the proactive, contextual-based analytics at the other end of the spectrum. Each of these varying analytic types requires different approaches or solutions but must first be grounded in data governance and strategy driven by business goals and objectives.

The New Stadium – Data Lakes

Just like baseball, insurers need to rethink their “stadium” … from a data warehouse to a data lake. The abundance of data that proliferates the world of insurance has always been difficult to centralize effectively for distribution to users across the enterprise. The old stadiums (aka data warehouses) were touted as a single version of truth where all data would come together to give a holistic view of the business.

Unfortunately, the promise of the data warehouse has repeatedly been found to be elusive. The reason for this was simple; today’s version of “all of your data” is not the same as yesterday’s and will not be the same as tomorrow’s. The constant evolution of business makes the promise of a perfect data warehouse the goal you reach for, but never meet. We create data lakes to address that.

A data lake, by its design, does not set a finish line that you will never hit. Instead, it sets a framework in place to consistently acquire “all of your data” but allows you to deliver that data on a use case by use case basis so that you win not only the inning and game…but the series.

Change your Game to Win in a New Age of Insurance

The insurance industry is in the midst of profound change fueled by trends that are converging and pushing a sometimes slow-to-adapt industry into the digital age. The insurance industry’s historical business model primarily rests on the two pillars of gathering and using information regarding risk and deciding which large bucket of similar risks are consolidated; then acquiring capital to manage risk. These two pillars, combined with a bifurcated and inconsistent state regulatory system and the heavy investment in marketing brands for personal lines (such as the Gecko, Flo and others), have consistently conspired to keep new competitive entrants out of the traditional insurance ecosystem.

However, the digital shift is creating leaps in innovation and disruption, challenging the traditional business assumptions, operations, processes and products of the last 30-50 years. The fast growing field of new entrants and investors eyeing the insurance industry see it as a “prime opportunity” for disruption. Increasingly insurers are seeking paths to grow their businesses by capturing the next generation of customers with new engagement models, products and services. The increasing transparency and empowerment afforded by data, the Internet and digital technologies is leveling the playing field.

For traditional insurers to rise to the competitive forefront, it will require them to rethink their business models and realign them with the digital age and the massive sources of new and innovative data that will redefine the business for the next 10-20 years, not those sources from the past 10-20 years.  Insurers must rapidly recognize the relationship to game theory regarding their risk models.  In short, insurance companies are the house taking bets from their customers. Those customers are betting on winning a game whose rules they will never fully understand while playing against a constantly changing cast of characters they don’t know.

See also: The New Age of Insurance Aggregators  

Yesterday we automated existing processes, and we continued to battle underwriting — thinking in terms of “intangibles” that couldn’t be automated. Tomorrow we need to start thinking coverage by coverage / game by game, “How do we win? Can we re-engineer our formula for growth?” How do we find value in the market that others can’t see?

In this new age, value is not just in underwriting the right customers, but also in underwriting the right risks, under the right constraints and in the right markets. It is a new game of Moneyball … are you ready to join?

This article was written by Kris Moniz. It originally appeared on Majesco.com.

What Baseball Can Teach on Talent

In the 1988 film “Bull Durham,” Nuke LaLoosh, a young pitcher with great talent but no professional experience (or maturity), embarks on his professional career with the minor league Durham Bulls.

Crash Davis, an experienced though aging catcher near the end of his playing days, is responsible for grooming LaLoosh into a more polished player. Davis and the team’s coaches and managers spend an entire summer trying to teach LaLoosh the finer points of baseball, and – as importantly – how to think and comport himself like a professional. LaLoosh, Davis, and the Bulls have many ups and downs as the season progresses, but eventually Davis’ mentoring of LaLoosh is effective, and the young pitcher is poised to go onto to bigger and better things, just as Davis prepares to retire from the game.

There are many similarities between the insurance industry and “America’s Pastime,” not the least of which is how to manage and solve the challenges of maintaining a pipeline of young talent. The insurance industry can learn a great deal from baseball’s tried and true strategy of developing talent organically through the minor leagues.

Moreover, professional teams – which, like insurers, are in a data-driven business – have invested significantly in data analytics to operate more economically and efficiently with the resources they already have. Using similar strategies, the insurance industry can build an effective strategy for recruitment, training and development, as well as for sustainable operations, thereby establishing a platform for long-term success.

Too many Crash Davises and not enough Nuke LaLooshes

The insurance industry is facing a crisis – a rapidly aging workforce. According to the U.S. Bureau of Labor Statistics, the number of insurance professionals aged 55 years and older has increased 74% in the last 10 years; by 2018, a quarter of insurance industry employees will be within five to 10 years of retirement. Moreover, by 2017, one in every three U.S. employees will be a Millennial, and Millennials will make up 75% of the global workforce by 2025.

These workforce changes mirror the demographic shifts in the U.S. population. The U.S. Census Bureau estimates that, in the U.S. alone, 10,000 baby boomers (those born between 1946 and 1964) will turn age 65 each and every day until 2030. While the expected number of Americans age 65 and older who leave the workforce will grow 75% by 2050, the expected number of American workers age 25 to 54 will grow by only 2%.

Most U.S. employers are woefully unprepared for the business realities of an aging workforce and face a potentially massive loss of skilled, knowledgeable workers. Companies that effectively recruit, train and develop dedicated future staff and leaders will differentiate themselves and set themselves up for success. Like professional baseball teams, they are trying to find ways to maximize existing talent and replenish it. Also like baseball teams, they are attempting to more effectively use analytics to improve functional efficiencies (e.g., scouting in baseball and claims/underwriting in insurance), as well as continue to automate routine/recurring processes (e.g., data collection in both industries).

Recruit

Traditionally, baseball teams have employed scouts who are responsible for finding and evaluating amateur baseball talent. The scouts talk with each other and college and high school coaches to develop a network of contacts and resources.

Human resources recruiters are the scouting departments of the insurance industry. Similar to baseball, where major league teams can either hire qualified free agents or grow talent organically through the minor league system, insurance recruiters have two options – to hire experienced candidates or recruit and develop raw talent through effective training programs. (For the purposes of this report, we focus below on acquiring and retaining young talent.)

Effective college campus and entry level hiring programs are just the first step in growing talent organically. Organic growth can only occur with the development of robust recruiting programs that focus on two key things:

  • Improving the insurance industry brand. Show Millennials that insurance isn’t boring. Insurance isn’t just about adjusting claims or underwriting risks, and it’s not necessarily an office-bound industry. It offers technical, sales, account management, data analytics and product development jobs similar to those in other industries that have more of a ”hip” image.
  • Educating talent about the variety of roles available in the industry. Letting young people know there are rewarding career paths available in insurance (and working with them to make the promise a reality) is more likely to result in long-term employment.

To recruit Millennials, companies must adapt their recruiting strategies. Companies must think like this generation, supplementing recruiting on college campuses and at career fairs with outreach via social media and online talent communities.

See Also: Why Millennials Are the Best Workers

In “Bull Durham,” Annie Savoy says, “Well, actually, nobody on this planet ever really chooses each other. I mean, it’s all a question of quantum physics, molecular attraction and timing.” However, as an employer, you DO choose employees and need to be in the best possible position to make them want to choose you.

Train

Training new employees, much like training baseball rookies, is critical to retaining talent. Companies that find ways to deliver cost-effective, interesting and meaningful training in fundamentals, coupled with mentorship programs that pair young employees with experienced ones, will create sustainable leadership pipelines. Of note, companies that use e-learning, which appeals to Millennials much more than conference room meetings and presentations, will especially benefit:

  • Company perceived as cutting-edge. A newly hired Millennial trained via an easy-to-follow e-learning system that is technologically up to date, with quality graphics and sound, will perceive that the company is on the cutting edge of technology.
  • Millennials feel respected. Companies that develop a high-quality, customized e-learning program, catering to the way Millennials learn, will demonstrate value and respect for the time and talents of their employees and build loyal, hard-working and fulfilled employees.
  • Cost-effective and agile. E-learning is well-suited to today’s work environment, which is fast-paced and characterized by constant change. Easily customizable and cost-effective, e-learning easily keeps pace with the rate at which technology, work procedures and workers develop.

When asked if he’s heard of Walt Whitman, Nuke says, “No. Who’s he play for?” We hope your personnel development and education is easier, but you should have the processes and systems in place to answer the questions of a younger generation that is learning on the job.

Developing a succession management plan that prioritizes leadership development not only improves retention, building a solid pipeline of talent for years to come, but also reduces recruiting costs.

Over the last 15 years, many baseball owners have realized that a high payroll does not necessarily result in on-field success. Expensive free agents are not a sure thing, and savvy clubs realized that they could be competitive (and have a lower payroll) by developing young players in-house. The World Series champion Kansas City Royals are a case in point: The team has developed much of its roster – and many of its best players – in its own system.

Because top talent clearly is a competitive differentiator, companies will define future success by developing deep and enduring bench strength – a pipeline of players with the leadership skills to be successful in the “big leagues.”

Good development results in beneficial, life-long lessons that benefit the employee and employer. Consider the following exchange after Nuke and Crash fight:

Crash: Did you hit me with your right hand or did you hit me with your left?

Nuke: My left.

Crash: Good! That’s good! When you get in a fight with a drunk, you don’t hit him with your pitching hand.

Remaining competitive even after the veterans leave

Attracting and hiring Millennials is only one way to address the challenge of an aging workforce, and building a developmental system is not the only way companies can promote the transfer of knowledge from one generation to the next. Many organizations are now seeking operational efficiencies via outsourcing, predictive analytics and automation to help address the challenges of an aging workforce.

Shifting back office operations (e.g., claims processing, call centers and mail rooms) to an outsourcing provider can help obviate the need to replace retiring workers. While companies historically have considered outsourcing from a cost and labor arbitrage perspective, they are now making it part of their overall growth strategy because the right outsourcing partners can help them create efficiencies, lower costs and enjoy bottom line savings.

Moreover, by consolidating existing and incoming information into standardized management systems and using advanced analytics to interpret this data, companies can position themselves to make better business decisions – consider the Oakland A’s now famous and commonly used “Moneyball” approach – with a smaller workforce. Some companies have gone so far as to globally standardize key processes by using business process management or workflow software that promotes procedural consistency throughout the enterprise.

As has been the case with forward-thinking baseball teams, these types of investments have enabled leading carriers to more effectively manage and use the vast amounts of structured and unstructured data they possess. Perhaps as importantly, these companies also have increased worker productivity because their employees are now able to focus much more of their time on value-added activities instead of routine, low- to no-value administrative and clerical tasks.

Last but not least, the carriers that have made meaningful investments in outsourcing, business process improvement and advanced analytics have created a virtuous cycle in terms of recruiting. Companies that are on the cutting edge of business technology are also more attractive to Millennials. As a result, these employers not only need fewer employees, they attract higher-caliber newcomers.

See Also: 22 Steps to Reduce the Impact of Retirement

To meet the challenges of an aging workforce, prescient carriers, agencies and brokers are already changing how they recruit and assess their workplace. They are modifying policies to appeal to Millennials, making physical changes to create a more inviting workplace and facilitating knowledge transfer to improve the long-term viability of their organizations. With the impending profound demographic changes, the need to build a pipeline of new talent is mission-critical. In addition, to further minimize the effects a shortage of workers may have, many companies have recognized the need to modernize processes and systems to more effectively manage the business even with a smaller workforce.

Implications

  • The insurance industry is facing an impending talent crunch. If it does not take steps to attract young employees, the crunch will become a crisis.
  • Millennials will soon predominate in the workforce, and insurers need to differentiate themselves from companies in other industries as being attractive places for Millennials to work. They can do this by:

– Effective recruiting that demonstrates rewarding career paths exist in the industry.

– Training that pairs new hires with experienced employees and helps build mentoring relationships; e-learning is a cost-effective way to do this, and one that Millennials like.

– Developing leaders internally – akin to a minor league system – which both encourages retention among younger employees and also eases internal succession planning because it ensures there is a healthy talent pipeline.

– Strategic outsourcing that focuses on complementary capabilities and not just cost reduction; modernizing business processes and effectively employing advanced analytics can significantly improve efficiencies, reduce costs, foster a focus on the things that really add value to the business and attract the best and the brightest newcomers to the industry workforce.

The Moneyball Approach to Cyber

It took a while for me to understand baseball: I didn’t get it until someone pointed out that I was watching the game when I should have been watching the season.

Much of the game’s strategy snapped into focus — and the differentiation between game-day action and long-term success illustrates key lessons that information security executives need to learn.

Love it or hate it, Moneyball is part of the game now. Moneyball and sabermetrics-applying sophisticated statistical analysis to baseball records-helps teams avoid overspending on showy all-arounders and focus instead on key metrics, however unusual, to build a successful team.

Information security should follow the same strategy. (And most chief information security officers (CISOs) probably feel more kinship with the cash-strapped Oakland Athletics, pioneers of Moneyball, than with the flush New York Yankees.) CISOs will see that, as in baseball, relying on a few stars to carry the team is a short-sighted and potentially costly plan.

In his 2014 Black Hat keynote, computer security analyst Dan Geer declared the end of the era of information security generalists. It can be hard to measure the contributions of specialists. We understand the easy metrics intuitively-the “batting averages” of information security. But it is the hard and subtle metrics that really teach us something new. Getting these metrics will require automation and thoughtful changes to existing sources of unstructured data: processes performed manually can’t keep pace with business needs.

Security & Privacy Weekly News Roundup: Stay informed of key patterns and trends

Alongside the outmoded concept of star all-arounders, we also should toss the concept of clutch players. Statistically, they don’t exist, and seeking them out in a technical organization is asking to be deceived; individual heroics are dramatic but not sustainable. An organization’s long-term success won’t be seen in the individual who burns the midnight oil to deploy the patch of the week, but in the one who quietly solves the problems around reliable, rolling deployments.

CISOs should also listen to the refrain of baseball commentators: “fundamentals.” A team that cannot execute basic, everyday maneuvers flawlessly is not prepared to get fancy. There’s no point in deploying a shiny intrusion-detection system or hiring an expensive, full-contact “red team” unless operations can convince you that every last default password has been changed.

Finally, we can take one more lesson from the game: Every so often, be sure to stand up and stretch.

Moneyball and the Art of Workers' Comp Medical Management

Recently, I watched “Moneyball,” the movie, for the third or fourth time. The story is compelling, as is the book by the same name that preceded it.1

“Moneyball” is based on the concept called Sabermetrics, defined as “the search for objective knowledge about baseball.” The central premise of “Moneyball” is that the collective wisdom of baseball insiders, including players, managers, coaches, and scouts over the past century, is subjective and flawed. The book argues that the Oakland Athletics general manager, Billy Beane, took advantage of analytic, evidenced-based measures of player performance to field a team that could compete successfully against far-richer teams in Major League Baseball. During the 2002 season, the Oakland A's won enough games to make the playoffs in spite of a meager salary budget and “inferior” players.

Even though the two industries are diametrically dissimilar, distinct parallels can be drawn between baseball and workers’ compensation medical management.

Similar Resistance to Analytics

One similarity is the resistance to adopting analytics as a knowledge tool. Baseball insiders and managers opposed Beane’s analytics, sometimes vehemently. Long-held beliefs among baseball insiders promoted measures of performance such as stolen bases and batting averages. Beane’s metrics debunked the old methods, revealing unrecognized strengths in lesser-known, more affordable players.

Similarly, workers’ compensation leaders have relied on traditional medical provider networks and personal preferences to select medical doctors. If doctors are in a network and offer a discount on medical services, all is good. Yet, industry research has shown that not all doctors are equal. Doctors and other medical providers who understand and acknowledge the nuances of workers’ compensation drive better outcomes. It’s a matter of finding those doctors.

Finding Best Performers

The purpose of “Moneyball” Sabermetrics is the same as workers’ compensation medical metrics—to find the best performers for the job. The way to do that in baseball is to analyze the data defining actual performance in terms of outcome—games won. In workers’ comp, the data must be scrutinized to find doctors who drive positive claim outcomes. In both cases, a variety of metrics are used to support the most effective decisions.

Performance Indicators

As in baseball, the goal in medical management is to apply objective information to decision-making using evidenced-based measures of performance. For both industries, cost is a factor. However, in workers’ compensation, the cost of medical care must be tempered by other factors:  What is the duration of medical treatment? What is the return-to-work rate associated with individual doctors? What providers are associated with litigated claims?

As in baseball, the list of indicators for performance analysis is long. However, the sources of data differ significantly.

The Data Challenge

In baseball, all the data necessary for analysis is neatly packaged. Statistics are gathered while the game is in progress. In workers’ comp, the data that informs medical management resides in disparate systems and must be gathered and integrated in a logical manner.

Essential data lives in bill review systems, claims adjudication systems and pharmacy (PBM) systems and can also be found in utilization review systems, peer review systems, and medical case management systems. The data must be integrated at the claim level to portray the most comprehensive historic and current status of the claim. Data derived from only one or two sources omits critical factors and can distort the actual status or outcome of the claim.

Once the data has been integrated around individual claims, meaningful analysis can begin. Indicators of performance can be analyzed with new conclusions drawn about the course of treatment and medical provider performance. Moreover, concurrently monitoring the updated claim data leads to appropriate and timely decisions.

Data Positioned as a Work-in-Progress Tool

In baseball, the data is used as a work-in-progress information tool. Decisions about the best use of players are made daily, sometimes hourly. Workers’ compensation medical management can do the same. Systems designed to monitor claim details and progress can alert the appropriate persons when events or conditions portend complexity and cost.

Industry Status

Analytics in baseball is not exclusive to the “Moneyball” Oakland Athletics. All of Major League Baseball now relies heavily on its use. Unfortunately, there are still only a few visionary Billy Beanes in workers’ compensation medical management. Yet, applying analytics for cost and quality control is simple and affordable and can be adopted quickly by all.

1Lewis. M. Moneyball: The Art of Winning an Unfair Game 2003. The film “Moneyball”, starring, Brad Pitt was released in 2011.