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As insurers become increasingly focused on analytics, metrics and internal reporting, roles for auditors and actuaries are expanding. Actuarial and auditing firms share their insights into how they are helping insurers and reinsurers understand and use the expanding wealth of data and financial information.

ACCOUNTING & ACTUARIAL SERVICES

ISSUES & ANSWERS:

Interviewed Inside:

Katey WalkerWillis Towers Watson

Michael NotarangeloGrant Thornton LLP

Dennis J. FrioGrant Thornton LLP

More insurers are embracing InsurTech to deliver better customer experiences, harness advanced analytics and automate work ows. Willis Towers Watson understands the economics of insurance and its underlying performance drivers. With proven technology, we make the complex simple, so you can innovate with con dence.

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Go to the Issues & Answers section at bestreview.com to watch an interview with Katey Walker.

Your ExecutiveTitle Company

Partnering with an experienced adviser like Willis Towers Watson can enable insurers to operationalize their analytics strategy more efficiently and minimize regulatory concerns.

■ Provides powerful combination of advisory services.

■ Integrated with leading-edge technology solutions.

■ Unparalleled analytic capabilities.

Katey WalkerSenior Director Willis Towers Watson

Next Level Data Analytics Katey Walker, senior director at Willis Towers Watson said data and analytics are being used by insurers to streamline processes and personalize customer interactions. “Underwriting is becoming increasingly automated with massive amounts of driver and property data readily available,” she said. The following Q&A is an excerpt from a recent interview.

How are data and analytics transforming the insurance industry?Insurance carriers have historically focused on using data and predictive analytics for more accurate pricing and risk segmentation. As new data sources have emerged and capabilities advanced, insurers have expanded their analytics remit to include digital transformation to reduce costs and enhance customer experiences. Customers now expect mobile and digital solutions—to make payments, access policy information and report claims. Companies are competing to find new ways to interact with customers including voice-controlled applications, like Alexa, to educate consumers and help them obtain insurance coverage, as well as digital or mobile claims reporting for minor claims.

What are some of the top analytics challenges for insurance companies?Data management is an increasing concern both from a privacy perspective and when considering the large quantity of data that must be formatted and stored. This creates the additional challenge of having qualified people to manage the process. Top candidates are data savvy statisticians who also possess business acumen. Additionally, many insurers are challenged by the notion of “how much data is too much data?” How much emphasis should we place on new techniques and methodologies? How do we continue to evolve our practice to gain competitive advantage and profitable growth? Also, as many of these projects and advancements are being done for the first time, insurance companies are tasked with developing and executing a road map with traditional resources.

How are advances in data science impacting insurance companies?Data science is helping the insurance industry progress their analytics capabilities by combining both structured and unstructured data for more actionable insights. Data scientists provide a unique perspective on problem solving and data interpretation. Their skill set includes advanced programming knowledge, and they often bring relevant experience from other industries. Insurers now recognize that aligning data scientists with actuaries and other insurance

experts delivers the best outcomes. Actuaries have a tremendous industry knowledge and business acumen—they are insurance experts. The training and credentialing process for actuaries is rigorous and provides a superior foundational knowledge that is universally trusted by regulators and the public.

More insurers are embracing InsurTech to deliver better customer experiences, harness advanced analytics and automate work ows. Willis Towers Watson understands the economics of insurance and its underlying performance drivers. With proven technology, we make the complex simple, so you can innovate with con dence.

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In the ongoing battle to remain competitive, insurance companies rely on a growing network of third parties to deliver products and services. Yet sharing sensitive company or customer data beyond their own firewalls introduces new forms of risk that need to be carefully managed. In a 2018 Ponemon survey, 61% of companies said they have experienced a data breach caused by one of their third parties, yet only 34% keep a comprehensive inventory of who they are and what risks they pose. Understanding who your third parties are and the criticality of their services is first and foremost. It allows you to focus your time, costs and resources on those third parties that may cause the greatest reputational risks to your company.

How significant is the third-party risk issue for insurance companies?Extremely significant. As business services are outsourced and broker networks expand, sensitive data that has traditionally been used internally is now processed outside of an organization’s network, sometimes in foreign countries. This includes customer or employee personally identifiable information, product data, and other intellectual property. Global privacy regulations, such as GDPR, are changing what kind of data types can be transferred and stored. Third parties are managing important operations offshore so it is also important to assess the third parties’ business continuity, physical security and disaster-planning controls from year to year.

Are there any third-party risk areas that are overlooked? The first area that is typically overlooked is solid risk reporting. Many insurance companies struggle to prepare reports that show the aggregate risk of a third party that performs several services or highlight where third-party risk may be concentrated in a business unit or geographic region. Understanding what risk reports you need, the data fields required to create these reports and the proper risk model that brings together the right relationships and hierarchy is paramount for success. The second area is the need to continuously monitor the third parties control environment after contract signing and over the course of the contracts life cycle. Leading organizations use a two-pronged approach for higher-risk third parties. They perform periodic control assessments, either internally or with consultants, and then monitor negative news, and financial and threat intelligence feeds that may cause reputational risks to the insurance

Risks of Third-Party Vendors

company. The third is a lack of collaboration with peers. Insurance companies assess the same risks (e.g. information security/data privacy) from the same third parties using different sets of questions, controls and procedures. It is duplicative, time consuming and costly. There is value in working together, across the insurance industry, even among competitors, to develop standard controls to assess shared third parties and services. Some examples of service categories that lend themselves to risk collaboration are outsourced providers, insurance brokers, claims processors and payment providers.

What are the first steps any company should take in building its third-party risk management program?First, assign the responsibility for managing third-party risks to an owner and give them the authority to act. Too often we see the accountability for third-party risks dispersed throughout the organization, with no one owning the full risk complement and how it may be concentrated. In addition, at those companies that have an assigned third-party program head, that person often lacks the authority for real change. Once you have the right accountability and authority, your program should consider the full life cycle of third-party relationships, from risk planning and initial evaluation, all the way through contract termination.

Michael NotarangeloPartner, Northeast Insurance Industry Leader, Grant Thornton LLP

Dennis J. FrioManaging Director, Head of Third Party Risk, Grant Thornton LLP