Show Me the Money! Using Data to Drive Cost-Effective Innovation in the Construction Industry
Innovation is everywhere in the insurance industry! Don’t believe me? Then trust Google. A quick search on this topic generates over 3 million results in 0.59 seconds. With such overwhelming data on this subject, what’s really going on? What are companies doing in this ever-changing space?
At XL Catlin, we’ve made a significant investment in innovation. Through our XL Innovate and Accelerate teams, we’ve focused on bringing new products to market and have partnered on with leading companies in many areas including driverless cars, artificial intelligence, environmental monitoring, and on-demand insurance for the on-demand economy.
Our North America Construction’s team is also tackling innovation through several key initiatives – from weather analytics to wearable technology. One of the biggest challenges we see is the cost related to innovation. We believe that innovation can come in many forms. It doesn’t have to be an expensive IT-based solution and it doesn’t have to require a huge commitment. We’ve taken the approach of doing pilots to determine what works, and invest from there. We’re willing to invest in the right opportunities, but need to be fiscally smart and make sure the investment is with a partner that will drive loss costs down and provide customers with a service that is beneficial to their business. Here are few things we’ve been working on:
- Weather analytics. We’ve begun a pilot with a firm focused on weather analytics. How can we better predict weather based on historical information, analyze information post event, and ultimately how can our contractors use this information to help in planning the construction sequencing on a large building or pipeline? Could this information be entered into models that help you decide if you have time to do a key task out of sequence with more educated risk based on this historical information? This is no doubt innovative, but we’ll need to determine how to scale the technology in a way that it works for all types of contractors, and provides not only a planning aspect, but also one that keeps your employees safe.
- Making “wearables” work. We’ve had many discussions on wearable technology, with both known providers, and also true innovators that are trying to solve for the most frequent claims a construction worker might have. This technology continues to evolve and we’ll likely find a partner that has the same enthusiasm for innovation that we do. We’re convinced that we can find a middle ground that is not “big brother”, but keeps employees safe on the job and provides adequate warning to the individual.
In 2017, approximately $1.07 billion was raised by InsureTech firms to develop their innovative technologies. Effective, cost and time saving innovation, however, does not always carry a hefty investment. Working closely with our clients, we’re finding that small investments can yield big results. This customer-focused approach is core to our construction business. It’s an everyday event that our Underwriting, Claims, Actuarial, Operations, and Risk Engineering are talking about a client or trend in our collective industry. And because we underwrite all lines of the Construction industry, we regularly look at trends on a particular account, across our portfolio, or information we’re reading in publications and news releases.
As we get a sense of a trend, we discuss what we can do to support our contractors and prevent further loss, with the goal of ultimately improving our overall loss ratio. The most obvious area where we see trends is in auto-related claims. We could all be better drivers, be a little more defensive, be less distracted, but do we ever take the time to do something about it? The recent industry trends correlate with this–2016 produced one of the highest rates of auto-related deaths in nine years. Drivers are distracted. According to said NSC President and CEO Deborah A.P. Hersman, “Our complacency is killing us. Americans believe there is nothing we can do to stop crashes from happening, but that isn’t true. The U.S. lags the rest of the developed world in addressing highway fatalities. We know what needs to be done; we just haven’t done it.”
Digging into the Data
As a result of these rising auto-related death trends, our Construction Risk Engineering team went looking for solutions. They identified some excellent online training from the National Safety Council that costs roughly $15 per driver. This is on-line training that hits on the basics of defensive driving and does so in a compelling way. Why is this innovative? It’s simple–we’re looking at this not as a single event, but looking at those contractors that have committed to put all drivers through the program. And guess what? The data makes a compelling case:
|One client with over 900 drivers…|
|2015||Auto losses were almost $3 million|
|2016||Auto losses were over $4 million|
|Sept 2016||Training begins|
|2017||Auto losses were $1.8 million ̶ reduced by more than 50% since 2016|
|TOTAL COST OF TRAINING: less than $25 thousand|
Digging further into the data, we also saw the same client’s Workers Compensation results dropped $4 million. This is coupled with the contractor adding to its fleet and having more employees year over year. Talk about a high return on your investment!
We’ve also found that investing in training results in lower claims activity, safer employees, and an opportunity to potentially reverse a long time industry trend. In an age where everyone likes options on how to get information and learn on their own, this training doesn’t require you to sit in a classroom or read a textbook. It’s a simple and cost-effective way to deliver necessary training, that completely correlates to the safety of your employees and an eventual reduction in workers compensation claims/auto loss.
Some of our largest contractors who’ve committed to fully embracing this training have seen a reduction in loss cost that matters. This training correlates to the lower loss experience, and is because many of our customers have taken a renewed interest in partnering with us on such an important issue. If you want to learn more about this training, Scott Merchant, Head of Construction Risk Engineering, would love to hear from you.
“We’ve used the collected information to provide insights to our partners both from a safety management/training perspective, and to collaborate with vendors that might be able to improve results.”
My Data is Your Data
Another cost-effective, data-driven innovation came from looking for a tool to better organize our Risk Engineering data. We collect so much information from site visits and regular discussions with contractors, but as our business has grown, we recognized the need to make an investment in data analytics. Over the years, we’ve used the collected information in two key ways–to provide insights to our partners both from a safety management/training perspective, and to collaborate with vendors that might be able to improve results. In the last year, we’ve worked with Predictive Solutions, a safety company, that’s been providing us with a true 360 degree look at quality and safety reporting data. This system isn’t just for internal use, but will allow us to share on-site reporting with customers–and customers will be able to use the system as well. Some of our largest contractors have already signed on. The benefits are huge. Instead of our risk engineers doing several site reviews a year, site safety and control teams can now generate hundreds of reports on current conditions. This gives us real time data, allows us to analyze and share insights with our customers, and offer a much higher degree of precision and advanced risk engineering oversight. We expect the additional data aggregation will allow us to partner with customers at a rapid rate, working together to identify their unique needs via predictive trending, tailored in a more efficient, responsive way. This pilot has proven to be a very cost-effective investment and we expect to share more details on it in 2018. “It’s about transforming vast amounts of data into insights that deliver value to each customer–pulling out the key trends, emerging risks, and providing ongoing analysis that helps to increase customer safety,” says Scott Merchant, Head of Construction Engineering.
While we continue to make investments in big industry game changers, we’ll also continue our pursuit of finding cost-effective innovations and bringing these to our customer’s attention – not just after a claim occurs, but early on in each customer relationship. As our ability to get better data and analytics improves each day, we’ll use this to determine what customers need to drive overall loss cost down and help keep employees safe on the job. And we’ll take a broad approach–finding innovations that not only work for one customer, but have the potential to work for all customers that fit a similar data profile.
Are you using data to drive innovation at your company? We’d love to hear about it. Let’s talk about how we can work together to reverse industry trends and use data to drive cost-effective innovation.
About the Author
Justin Gress is director of strategic operations for XL Catlin’s North America Construction business. He loves to hear about data-driven innovation! Send him your thoughts at [email protected].
Article originally found on XL Catlin.