Analytics to predict longevity

Life insurance companies have found a new use for the vast dossiers of data: predicting people’s longevity. Insurers have long used blood and urine tests to assess people's health. In a remarkable use of consumer marketing data, insurers are now exploring whether online shopping details, magazine subscriptions, leisure activities and social-networking information can reveal nearly as much about a person as a lab analysis of their bodily fluids.

In one of the biggest tests, the U.S. arm of British insurer Aviva PLC looked at 60,000 recent insurance applicants. "Requiring every customer to provide additional, and often unnecessary, information" such as blood or urine samples, "simply makes the process less efficient and less customer-friendly," says John Currier, chief actuary for Aviva USA. They showcased, before the Society of Actuaries, two hypothetical 40-year old insurance customers “Sarah” and “Beth”.

Sarah reads design and travel magazines, has a short commute, runs, bikes, plays tennis and does aerobics. She eats healthy food, watches little TV and travels abroad. She is an "urban single" with a premium bank card and "good financial indicators". Beth, on the other hand, has a 45-mile commute, is divorced with no kids, frequently buys fast food, walks for exercise, buys diet and weight loss products, and is an avid TV watcher.

Sarah falls into a “healthier risk category”, while Beth is a candidate for worse-than-average predicted mortality. Based on that, the insurance company would proactively make efforts to retain Sarah with a preferred policy. On the other hand, they would recommend not sending Beth offers or using more aggressive retention methods.

Making the approach feasible is a trove of new information being assembled by giant data-collection firms like Acxiom, Experian, Infogroup, etc. Some retailers share information about purchases made by people, including item description, price and the person's name. Increasingly, information comes from people's online behavior. Acxiom says it buys data from online publishers about what kinds of articles a subscriber reads—financial or sports, for example—and can find out if somebody's a gourmet-food lover from their online purchases. Online marketers often tap data sources like these to target ads at Web users. These companies then sort details of online and offline purchases to help categorize people as runners or hikers, dieters or couch potatoes. They also scoop up public records such as hunting permits, boat registrations and property transfers. They run surveys designed to coax people to describe their lifestyles and health conditions.

Data mining has long been used for targeted advertising, but if this method was implemented for insurance, it's questionable whether it would be subject to the Fair Debt Collection Practices Act. Other insurers exploring similar technology include American International Group Inc. and Prudential Financial Inc.

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Indus Insights is a specialized consulting firm that assists organizations in leveraging analytics to drive business performance. They use state-of-the-art mathematical and statistical techniques to unlock game-changing insights hidden in data; and then translate these insights into actionable strategies.

First Look: The second annual New Intelligent Enterprise survey

MIT Sloan Management Review conducted a large scale global survey of 4,000 executives, managers and analysts from a wide range of industries. The theme of this 27 question survey was Analytics, with a somewhat broader scope. Nina Kruschwitz, MIT Sloan Management Review’s managing editor and special projects manager, published a few interesting trends in the preview, with the full report due in Fall this year.

1. Access to Data needs Improvement: Only about 4 in 10 respondents have access to the information they want either to a great extent or completely. The majority are less satisfied with their information access — and almost 1/5 either have limited or no access to the data they need to succeed in their jobs
2. Consistency is key: Organizations are concerned that the quality of the data they use in decision making is consistent. It may be more important to have uniformly consistent data quality across the organization, rather than perfect data from one business unit and poor quality data from another
3. Walk the Talk: respondents want leaders to practice what they preach. If the organization’s leaders make fact-based decisions themselves, in service of the organization’s long-term vision, and demonstrate a willingness to share data across silos, will the rest of the organization be more willing to do the same
4. Organizations unsure how to use data: Organizations continue to struggle to understand how to use analytics to improve the business and to find the time to figure it out. Many of the challenges relate to organizational politics such as who owns the data and who has access to it
5. Not easy to integrate data: The top two challenges that organizations have in using analytics effectively are reminiscent of the challenges that companies have always cited for using business information. Integration is never an easy task, and as organizations take on bigger, bolder goals, the complexity can be overwhelming
6. Primary Business Objectives have not changed: While the top three business objectives remain the same this year compared with last, their order has changed. In 2010, innovating to achieve competitive differentiation was number one; this year it’s growing revenue. There also seems to be a new focus on expansion: Penetrating new markets and acquiring new customers are getting more attention than squeezing more out of what you already have (such as workforce performance or operating speed)
7. Technology is not the problem: Respondents believe that organizational or cultural challenges are almost twice as hard to solve as technological issues. That suggests that leaders have their work cut out for them — and underscores the need for leaders to practice what they preach before the organization is able to use analytics most effectively.

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A web site and print magazine published at the MIT Sloan School of Management, MIT Sloan Management Review’s mission is to lead the conversation among thinkers, professors, and managers about the coming sea changes in management practice that will transform how people innovate and lead.

Indus Insights is a specialized consulting firm that assists organization in leveraging analytics to drive business performance. They use state-of-the-art mathematical and statistical techniques to unlock game-changing insights hidden in data; and then translate these insights into actionable strategies.