Verisk Analytics: [Nasdaq:Vrsk]: Transformational Insurance Analytics

Scott Stephenson, Chairman, President, & CEO, Verisk AnalyticsScott Stephenson, Chairman, President, & CEO Big data is no longer confined to the realm of technology. It is today a business imperative. According to IBM’s latest big data study, 74 percent of insurance organizations indicate that the use of big data and analytics is creating a competitive advantage for their organizations. With the aim to provide predictive analytics and decision support solutions in fraud prevention, actuarial science, and insurance coverages, Verisk Analytics [NASDAQ:VRSK] was founded in 1971 through the consolidation of various state, regional, and national rating bureaus. Today, the company is assisting customers around the globe to make better decisions about risk, investments, and operations with greater precision, efficiency, and discipline. Using advanced technologies to collect and analyze billions of records, Verisk draws on unique data assets and deep domain expertise to provide first-to-market innovations that are integrated into customer workflows. “Since our founding we’ve been aggregating data as the basis for predictive analytics in the property/ casualty insurance industry and developing insurance coverage programs for personal and commercial lines of business,” says Scott Stephenson, Chairman, President and CEO, Verisk Analytics. By performing essential functions that many insurers are unable to do on their own, Verisk helps lower costs, providing customers with the tools to build new products and enter new markets—thus promoting competition and solvency in the process.

As the insurance sector is constantly changing, fostering the modifications needed to adapt both to the new economic environments and the growing levels of safety, transparency, and effectiveness are increasingly being demanded by financial markets and citizens. The growing uncertainty is leading supervisors and firms to look for higher levels of safety through new approaches to solvency, supervision, and risk management procedures. This complex scenario has encouraged Verisk to operate through two segments: Risk Assessment and Decision Analytics. The Risk Assessment segment provides statistical, actuarial, and underwriting data for the U.S. Property and Casualty (P&C) insurance industry. Whereas, its Decision Analytics segment develops solutions that customers can use to analyze processes in managing risk.

Risk Assessment

The company’s Risk Assessment segment serves its P&C insurance customers and focuses on the prediction of loss, selection, and pricing of risk. Within this segment, the company also provides solutions to help its insurance customers comply with their reporting requirements in each of the U.S. state they operate in. Verisk’s risk assessment operations include its businesses or sister companies that offer solutions in various insurance genres. All of those units provide data, software, and information services to property/ casualty insurers and reinsurers in the U.S., as well as many international carriers.

Verisk’s insurance analytics measure the value of technological advances that help reduce risk

The company’s capabilities include catastrophe management, claims and fraud, compliance and reporting, data and statistical services, and insurance policy programs. For instance, IFG Companies (IFG)—one of the largest privately held insurance groups in U.S.—in order to expand its business with a new commercial property line, implemented AIR Worldwide’s—a Verisk Analytics business—Touchstone, a next generation risk management platform. By integrating Touchstone with other Verisk products, IFG was able to centralize production of all critical underwriting and pricing information into one comprehensive platform while maintaining robust underwriting and risk management controls.

Verisk’s comprehensive suite of tools supports customers at every step of the claims life cycle—from claims reporting and analysis through claims adjustment and investigations. The company’s tools, software, and analytics help users streamline their workflow, control costs, and fight fraud. Stephenson and team have created the industry’s premier claims reporting and management system, along with complementary databases, to help customers quickly identify meritorious claims for processing. Verisk offers a variety of tools to help detect and prevent fraud, including software that uses visual link-analysis technology to uncover suspicious patterns that would otherwise go undetected. Their specialized tools help users streamline the subrogation process; manage complex bodily injury, workers compensation, and comparative liability claims; and automate special investigative unit case management.

Data and Statistical Services

Credible and high-quality data is the foundation of sound decision-making. No organization relies more heavily on data than property/casualty insurers and the insurance departments that regulate them. Customers are able to gain significant benefits through Verisk’s statistical database that offers an array of analyses and reports. Verisk provides loss costs, aggregate information on insurance trends, cash flow and investment income analyses, classification and territory analyses, assessments of financial risk from catastrophic events, and reports on loss development and severity trends.

Users can use the extensive information in Verisk’s statistical database for rate making, reinsurance pricing, classification analysis, benchmarking, strategic planning, underwriting, and marketing. With data from their databases, customers can assess the profitability of market segments and track trends such as premium-to-exposure ratios and also evaluate their current markets and make better pricing and underwriting decisions.

Decision Analytics

Today, the insurance sector is witnessing a growing need for predictive models to forecast scenarios and produce both standard and customized analytics that help its customers manage their businesses, including predicting loss, selecting and pricing risk, detecting fraud before and after a loss event, and quantifying loss.

Verisk’s Decision Analytics segment provides fraud-detection tools for the P&C insurance industry. The company’s solutions can be used by claims adjusters to process claims and fight fraud, with a database containing information on approximately 1.1 billion claims. Verisk also provides a scoring system that helps distinguish between suspicious and meritorious claims and products that use link-analysis technology to help visualize and fight insurance fraud. The scoring system is engaged in the field of probabilistic catastrophe modeling used by insurers, reinsurers, and financial institutions to manage their catastrophe risk. Verisk has also developed a probabilistic terrorism model capable of quantifying the risk in the U.S. from the emerging threat, which supports pricing and underwriting decisions down to the level of an individual policy.

For instance, if an insurer uses Verisk’s ProMetrix—a commercial property database of buildings, occupants, and related analytics—they are able to gain key data elements delivered through API to underwriting rules engine. The rules engine accepts data such as construction class, occupancy class, and public protection classification. The insurer can use this information to determine factors and in which tier to write the business. They can identify additional reports or surveys needed to underwrite the property, along with the ability to create economies of scale by lowering unit cost of data through licensing.

"Customers gain significant benefits through Verisk’s statistical database that offers an array of analyses and reports"

Safeguarding the Future

“Verisk’s insurance analytics measure the value of technological advances that help reduce risk. When customers reflect those advances in pricing discounts, they not only reward individual policyholders, but also motivate builders and manufacturers to make buildings and products safer,” states Stephenson. Customers use Verisk’s database of insurance claims—the largest claims database in the world—to help expedite the payment of legitimate claims and detect suspect claims. For instance, “when a severely damaged vehicle has been declared a total loss, we report that information to the appropriate government agencies so the vehicle can’t be resold to an unsuspecting buyer. Through our equipment registry, we help law enforcement retrieve stolen construction and farm machinery and return it to the rightful owners. And our information assists states in recovering millions of dollars in unpaid child support payments on behalf of the children and families entitled to them,” adds Stephenson.

“We’re on a continuous quest to be the first to market with new innovations. We achieve that by forming strong relationships with our customers as development partners,” concludes Stephenson. For the road ahead, Verisk aims at integrating its products and services into customer workflows, helping them better understand and manage risk and make smarter decisions. Through ongoing collaboration, Verisk will be combining its data, analytics, and decision support platforms into comprehensive, industry-leading solutions. Being a socially responsible global company, Verisk will work toward becoming exceptional at data and risk analysis in the insurance sector.