Tag Archives: TransUnion

Challenges Remain on Use of Data, Analytics

As insurance companies look to optimize performance, mitigate risk and meet rising consumer expectations, they still face a plethora of challenges when it comes to data and analytics. Companies continue to aggregate more and more data – but the manner in which they are doing so is not necessarily efficient. Some 40% to 50% of analysts spend their time wrangling the data, rather than finding meaningful insights.

To address these operational inefficiencies, TransUnion commissioned Aite Group to conduct a study of insurance and financial services professionals. The findings from this study outline how companies can stay competitive in the insurance industry while adapting to the evolving world of data and analytics.

Like most established financial institutions, insurance companies have multiple data repositories across the organization. Individual business units own their respective processes for capturing and managing data and, more often than not, manage at the product level rather than at the customer level. This often leads to inconsistencies, with no set definitions of key terms such as “customer.” As a result, information and insights are isolated to silos – by lines of business or by product – creating barriers toward seamless data integration.

To maintain a competitive edge, insurance companies recognize the need for new data sources. More than half of the study’s respondents plan to increase spending on most types of data sources, especially newer ones, such as mobile. However, as big data gets even bigger, it becomes increasingly difficult for analytics executives to find valuable insights. Addressing the challenges that arise from big data volumes requires an enterprise data management strategy as well as an investment in the proper analytics tools and platforms for processing and analyzing the data for meaningful insights.  

The majority of these institutions are currently grappling with fractured data and legacy systems, which prevents these companies from extracting value and making the data actionable. 70% of those surveyed indicated that a single analytics platform, one that coordinates and connects internal and third-party systems, is a major differentiator. However, only about two in 10 respondents indicated that their current solutions have these capabilities.

This highlights the need for a coherent enterprise data and analytics strategy and a common platform to hold and integrate existing and new data sources, as well as analytical tools. The platform needs to be flexible to support different skill sets, react to changing market conditions and have the ability to integrate alternative sources of data.

See also: Why to Refocus on Data and Analytics  

In addition to leveraging the right tools, sourcing the right talent remains a key challenge for executives. Nearly half (45%) of insurance professionals indicate that having the right talent greatly improves their ability to underwrite profitable policies. However, due to a lack of bandwidth, insurance companies often do not have the resources to allow their analytics teams to stretch their analytics creativity. 

These operational challenges can result in a significant amount of time being dedicated to cleansing and prepping the data – preventing analytical teams from performing more valuable activities such as model development. The operational challenges create an obstacle for retaining talent as these sought-after data scientists are instead assigned to trivial work. 42% of the insurance professionals surveyed indicated that it is also challenging to find qualified data scientists in the first place. 

As the use of descriptive, prescription and predictive analytics gains traction, it is imperative that executives recognize the challenges and explore solutions. By overcoming these barriers, the industry will be better prepared to embark on the next frontier of data and analytics.

For more information about the TransUnion/Aite Group study, please visit the “Drowning in Data: Thirsty for Insights” landing page.

Getting the Full Picture on Driving Records

It’s not hard to see how drivers with histories of driving violations pose a higher risk to insurers. However, there may be another side to the story that isn’t immediately captured: A considerable portion of major driving offenses are dismissed or downgraded in the U.S. court system.

Today, 80% of drivers have access to programs that dismiss or downgrade their violations, which can obscure their driving history and mask dangerous behaviors. This means it’s important for insurers to stay abreast of new ways to help mitigate this risk and ensure they are providing customers with accurate quotes that capture the full risk profile.

Downgraded or dismissed? What does it mean?

Downgrades and dismissals can happen when courts make certain programs available. These programs are intended to ease the burden of costly tickets and ultimately help drivers stay licensed, insured and on the road. They can also take pressure off courtrooms and judges that are often backed up with cases. Unfortunately, as a result, people’s real driving violation histories may be disguised. In fact, according to TransUnion’s DriverRisk analysis, 57% of original major offenses, such as DUIs, are actually unobservable by insurers due to dismissals or downgrades. In the states evaluated, 27% of traffic tickets are outright dismissed.

See also: Smart Home = Smart Insurer! 

For example, in New Jersey, drivers can pay $250 to $350 to downgrade certain types of moving violations. A few states have programs for drivers facing a first-time DUI charge to have their case dismissed. For the cases not dismissed, these programs may add delays to the charge appearing on a state-issued driving record. Additionally, there are driving school programs available to drivers to dismiss or downgrade traffic tickets, or to remove points. There are also deferral or probation programs that can eliminate a violation from the state driving record.

So, while drivers benefit from fewer points on their license, insurers are potentially mispricing the policies for drivers whose original violations may have been obscured.

When insurers aren’t presented with the full picture, this can compromise how well premiums align with actual risks. To make things even worse, the DriverRisk study found that the more serious the violation is, the more likely it is to be dismissed or downgraded. The findings show that 41% of DUIs are likely to be dismissed, and distracted driving violations are dismissed 10% of the time. Without visibility into each driver’s actual behavior, insurers tend to spread the premium needed to pay losses associated with these risks across all policies.

This means the base rate for the average driver typically ends up being higher, effectively subsidizing the premium for the drivers with downgraded and dismissed violations. Drivers with dismissed or downgraded violations are more likely to have a loss and a higher loss cost than drivers found guilty of the violation they were ticketed for.

Details of Driving Violations

It is possible and very important for insurers to gain deeper insight into original violation information for prospective and current customers, in addition to the final disposition decisions. Insurers should seek information that includes court record data so they can provide more accurate quotes and improve adhering to their underwriting guidelines. Implementing court record violation data solutions can enable insurers to capture valuable insight into: convictions from a prior state (which may be associated with a previous driver’s license number), regardless of a change in name or address; convictions while driving outside of the resident state; tickets with dispositions other than guilty; and tickets and violations that are still active (not yet adjudicated).

See also: 5 Steps to Understand Distracted Driving  

Court record violation data is an essential tool for insurers to develop accurate pricing and underwriting strategies. By understanding a fuller picture of violation history, insurers will be able to more effectively assess the risk of each driver and implement programs to capture the appropriate amount of premium dollars for riskier drivers while providing more affordable premiums to cleaner drivers.

For additional information about TransUnion’s study findings and DriverRisk, please click here.

The Next Step in Underwriting

When a person applies for a mortgage in the U.S., credit reports are pulled from all three bureaus — Equifax, Experian and TransUnion. Why? Because a single bureau does not provide the whole story. When you’re lending hundreds of thousands or millions of dollars it makes sense to find out as much as you can about the people borrowing the money. The lender wants the whole story.

When you’re underwriting the property, doesn’t it make sense to get more than one perspective on its risk exposure? Everyone in the natural hazard risk exposure business collects different data, models that data differently, projects that data in different ways and scores the information uniquely. While most companies start with similar base data, how it gets treated from there varies greatly.

When it comes to hazard data there are also three primary providers, HazardHub, CoreLogic and Verisk. Each company has its team of hazard scientists and its own way of providing an answer to whatever risk underwriting and actuarial could be concerned with. While there are similarities in the answers provided, there are also enough differences — usually in properties with questionable risk exposure — that it makes sense to mitigate your risk by looking at multiple answers. Like the credit bureaus, each company provides a good picture of risk exposure, but, when you combine the data, you get as complete a picture as possible.

See also: Next Generation of Underwriting Is Here  

Looking at risk data is becoming more commonplace for insurers. However, if you are looking at a single source of data, it is much more difficult to use hazard risk data to limit your risk and provide competitive advantage. Advances in technology (including HazardHub’s incredibly robust APIs) make it easier than ever to incorporate multi-sourced hazard data into your manual and automated underwriting processes.

As an insurer, your risk is enormous. Using hazard data — especially multi-sourced hazard data — provides you with a significantly more robust risk picture than a single source.

At HazardHub, we believe in the power of hazard information and the benefits of multi-sourcing. Through the end of July, we’ll append our hazard data onto a file of your choice absolutely free, to let you see for yourself the value of adding HazardHub data to your underwriting efforts.

For more information, please contact us.

Be on the Lookout for Tax Scams

Las fall, authorities in India busted nine — yes, nine — bogus IRS call centers, arresting 70 people on suspicion of tricking (and often scaring) Americans into sending money to settle “pressing” but nonexistent tax bills.

You receive a call from a purported IRS agent claiming you owe money and must pay it immediately. If you can’t (or don’t) come up with the money pronto, well, you can expect a police officer or U.S. marshal at your door, and you will be arrested and thrown in jail. In a 21st-century version of this scheme, you receive a robocall where an automated voice directs you to call a specific number to settle your debts with Uncle Sam. If you don’t call back right away, you could be anything from sued to arrested to deported, or maybe you’ll just have your driver’s license revoked.

It’s an inelegant ruse, of course. The prize? Your hard-earned cash and, for good measure, some of your personally identifiable information (PII).

See also: Implications for Insurance Taxation?  

I probably don’t have to explain this hot-and-heavy approach because you’ve probably been on the receiving end of one of these phone calls. IRS scams are so prevalent they topped the Better Business Bureau’s top scams of 2015 by a mile — and that was well before the IRS itself issued a warning to taxpayers saying there was a “summer surge” last year in IRS impersonation scams, with a new variant asking poor, unsuspecting taxpayers to fork over payment on iTunes gift cards.

A sigh of relief?

If you think the major bust in India means you can breathe a little easier every time your phone rings, unfortunately, you’re wrong.

Make no mistake, those nine phony call centers represent only a small fraction of all the nefarious enterprises out there. Consider the latest stats from the U.S. Treasury Inspector General for Tax Administration published in The Wall Street Journal: 8,000 victims have paid more than $47 million because of these completely phony “IRS agents.”

Scams are akin to the old whack-a-mole game or, to put an even finer point on it, a Lernaean hydra — cut one of them down, and two more will spring forth. In fact, around the same time police were raiding the bogus call centers, reports had surfaced that there was a new IRS scam in town: Fraudsters have started to send out notices about fake IRS tax bills related to the Affordable Care Act via email and traditional snail mail in an effort to meet their, ahem, sales goals.

What you can do

You should stay vigilant because it’s about to get significantly more difficult to avoid getting got. The IRS announced it’s going to begin using private collection firms to handle overdue federal tax debt, a change that could effectively throw the one-step method of avoiding phony IRS agents — hang up the phone! — out the window.

The IRS has yet to make it completely clear whether it’s going to allow the collection firms it’s hired to call debtors directly. But even with this significant change, there will be a few dead giveaways that there’s a scammer on the other end of the line.

  1. If you do owe Uncle Sam, you’ll have received a bill in the mail, and should you be one of the more unfortunate ones turned over to a legitimate collector, you’ll also get written notice that your debt has been transferred over to one of its collection firms: CBE Group, Conserve, Performant and Pioneer.
  2. You’ll be allowed to make your payments online at IRS.gov/PayYourTaxBill, so, if you’re not being told about this option, hang up and notify the IRS.
  3. Payments by check should be made to the “U.S. Treasury.” If you’re being asked to write one made payable to the collector or even the IRS (which can easily be altered to read “MRS.”), hang up the phone.
  4. There will never be any threat involving police or marshals or prison.

Other ways to protect yourself

Here is the toll-free number for the IRS: 800-829-1040. If you get even the slightest inkling that someone is trying to swindle you, hang up and immediately call the agency.

See also: New Worry on ID Theft: Tax Fraud  

If you get an email that looks like it is coming from the IRS about a tax bill, do not click on any links (which could be malware designed to infect and infiltrate your computer system and steal any payment or personal information it can get its hands on). Instead, forward the email to phishing@irs.gov and wait patiently for someone to contact you about its validity.

What to do if you’re a victim

If you think you’ve already been had, well, then you’ve got some work to do. Report the crime to your local police, file a complaint with the Federal Trade Commission and call the IRS at the number provided above to find out if you really owe them money. Contact TIGTA to report the call either at 800-366-4484 or by using its IRS Impersonation Scam Reporting website. And then rely heavily on the three Ms I outline in my book, Swiped: How to Protect Yourself in a World Full of Scammers, Phishers and Identity Thieves:

  1. Minimize your exposure to fraud: If you did turn over your most sensitive personal information, request that a fraud alert be put on your credit file by all three credit bureaus — Equifax, Experian and TransUnion. You need only contact one, and it will electronically notify the other two. You might also consider a credit freeze, which is more comprehensive but cumbersome because you need to notify each credit bureau individually; lockdown of your credit report prevents thieves from opening new accounts in your name.
  2. Monitor your accounts. You might wish to purchase a combination credit and fraud monitoring service, which provides instant alerts if someone tries to open up lines of credit. You also may consider enrolling in transactional monitoring programs offered for free by banks, credit unions and credit card companies that notify you of any activity in your accounts. At the very least, keep an eye on your credit yourself. You can do this by pulling your credit reports for free each year at AnnualCreditReport.com and viewing two of your credit scores for free, updated every two weeks on Credit.com.
  3. Manage the damage. Close any account that has been tampered with or opened by a fraudster without your permission. And if you gave them the veritable skeleton key to your finances — your Social Security number — be sure to notify the IRS, do all of the above and file your taxes as early as possible next year to preclude anyone from getting their grubby little fingers on your refund.

Remember, it’s not just the phony taxman you have to worry about whenever you pick up the phone. Fraudsters come in all shapes and sizes, and, no matter how many scam centers authorities put out of business, the ultimate guardian of the consumer is the consumer (i.e., you)! Stay vigilant. While identity theft may be the third certainty in life, with a little luck you can make it that much harder for fraudsters to get you in their maw.

This post originally appeared on ThirdCertainty.

Full disclosure: IDT911 sponsors ThirdCertainty. This story originated as an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

More on identity theft:
Identity Theft: What You Need to Know
3 Dumb Things You Can Do With Email
How Can You Tell If Your Identity Has Been Stolen?

Google Applies Pressure to Innovate

This article was first published at re/code.

It’s a common thread in nearly every industry: Innovation occurs when consumers’ growing needs and expectations converge with intense competition. It’s no surprise, then, that insurance — not exactly known for being on the forefront of technology — is one of the last remaining industries to innovate and fully embrace data, analytics and customer communication technologies.

Insurance is a complex purchase business with a convoluted ecosystem and ever-changing regulatory requirements that has kept the industry in a well-protected bubble from external competition for decades. Now in 2015, the announcement of Google Compare for auto insurance pushes the industry to innovate from a technology standpoint, but most importantly from a structural standpoint, by changing the way insurance companies interact with their customers. The reasons below outline why Google has the greatest chance to succeed where others have not.

A Lesson From Other Industries

Google has previously disrupted numerous industries to great success — think health, travel and navigation — mostly because of its dominance in search. Many of Google’s consumer-facing businesses have followed as logical next steps in the Google search process. For example, do you want to use Google to search for the best insurance company, or would you prefer to find the best insurance company with the cheapest policy? Do you want to use Google to find the route for your road trip, or would you prefer to have Google find you the best route? Google’s constant innovation stems from a simple but effective idea: Eliminate an unnecessary extra step (or steps) in the process, and give the consumer what they desire most — ease and simplicity.

There are some who believe that the tech giant may not be doing anything noticeably different from other aggregators in the auto insurance space. However, if its accomplishments in other industries tell us anything, Google will find a way to engage the consumer better than incumbent insurers do. Rather than writing its own business and determining individual risks, Google has teamed up with carriers of all sizes to reach customers efficiently, allowing them to quickly search, get rates and compare policies “pound for pound.” Already, this platform has helped shift the insurance industry’s emphasis on the customer by allowing peer-to-peer ratings and allowing consumers to openly disclose any negative or positive experiences, which will breed superior customer service and experience.

Millennials Trust Google

It is highly unlikely that Google will ever become a full insurance company with its own agents and underwriters, but Google brings a brand name that elicits trust and familiarity. This is especially true of Millennials, who are set to overtake Baby Boomers as the largest consumer demographic, at 75.3 million in 2015. When Strategy Meets Action reported in early 2014 that two-thirds of insurance customers would consider purchasing products from organizations other than an insurer — including 23% from online service providers like Google — it created tension in the insurance industry. These findings are largely a reflection of consumer discontent with insurance companies and their seeming lack of transparency.

Millennials do not trust insurance companies, but they do trust Google with just about every engagement they have with the Internet. And consumers trust other consumers: Google Compare’s user feedback platform brings transparency to consumers and requires the insurance industry to reevaluate how to effectively engage customers in a tech-driven environment. Pushed by Google’s unique insight into Millennials, traditional insurance companies must acquaint themselves with their new consumers, who are often considered impatient, demanding and savvy about social media.

Establishing a Preferred Consumer Platform

An eye-opening Celent study recently found that less than 10% of North American consumers actually choose financial service products based on better results. Instead, a vast majority places higher importance on ease (26%) and convenience (26%). Based on these findings, Google is using a business model that embodies the preferred consumer experience, a notion that is being reinforced by initial pilot results in California.

According to Stephanie Cuthbertson, group product manager of Google Compare, millions of people have used Google to find quotes since its launch in March, and more than half received a quote cheaper than their existing policy. Other new entrants, like Overstock, have reported issues with completion of purchase because consumers will browse offerings but still hesitate to complete their purchase online in a single visit to a website. Google’s platform is attempting to avoid this issue by announcing agency support through its partnership with Insurance Technologies, allowing consumers peace of mind by speaking to an agent before purchasing a policy — but maintaining the online price quote throughout the buying experience.

Potential for Future Growth

While Google Compare is beginning with auto insurance, work with CoverHound gives a glimpse into where it may be looking to expand. CoverHound’s platform specializes in homeowners’ and renters’ insurance, the latter of which is growing exponentially with the Millennial generation, who prefer to rent rather than buy. According to a recent TransUnion study, seven out of 10 Millennials prefer to conduct research online with their laptop, computer or mobile device when searching for a new home or apartment to rent.

Google Compare has also already shown momentum by recently announcing its expansion of services to Texas, Illinois and Pennsylvania, while adding a ratings system for each company it works with — much like the insurance version of TripAdvisor or Expedia.

The Bottom Line

Nearly every industry undergoes disruption when consumer expectations shift and businesses are forced to adapt and keep up. For decades, insurance didn’t have the kind of pressure from outside entrants that it is currently facing. Whether Google fails or succeeds early on makes little difference: Its entrance is a wake-up call. The more tech companies enter the space, the more traditional insurance must struggle to play catch-up.

These new entrants are helping to not only force innovation from a technology standpoint but also to bring an innovation culture to the industry so insurers can stay ahead of consumers demands around buying and customer service. Agents and insurance carriers have a level of expertise that is unmatched by the Googles of the world, but it will be wasted if insurers can’t figure out a way to integrate that expertise in a modern way and connect to consumers through different social channels.

The writing is on the wall, and how traditional insurance reacts will ultimately decide its relevance in the industry of the future.