Less is more: The key to getting value from customer data is to keep both the data and the analysis simple. (Selling Insight: Life/Health).

To be competitive, insurers frequently turn to sophisticated analytic tools to gather and evaluate growing amounts of increasingly sophisticated customer data. Unfortunately, the ability to collect data does not assure that value will be captured from it. The key to getting value from customer data is to keep it simple, in both collecting and analyzing the data. In a time of significant stress for the insurance industry, such as it faces now, the ability to maximize the value gained from customer data in terms of generating profitable sales efficiently is critical.

The amount of data available to insurers today has increased in line with the growth in three areas:

* data sources;

* advanced tools for collecting and managing data; and

* the number of approaches for analyzing and using data.

The growth in the availability of customer data and its use has not generated equal increases in sales or profit for most insurers. This is especially significant now. Although pricing has improved in many areas, the extended poor performance of the capital markets has diminished many companies' ability to achieve attractive performance. At the same time, customer preferences are shifting from a return-driven orientation to a security orientation, both financially and emotionally.

Many insurers have found that sophisticated models and analytic tools do not necessarily produce improved insights or results. To be successful in getting value from customer data a company must do several things:

* focus on basic, but relevant data;

* look for simple themes; and

* act quickly to capture the opportunities.

Focusing on basic, but relevant, customer data provides several advantages to an insurer in capturing the maximum value from the data it collects. First, it limits the amount of data that must be captured, stored and managed by the company. It also increases the reliability of the data, in that the more basic the data, the fewer opportunities for errors to have been introduced into it. Third, it makes analysis simpler and easier to conduct. It allows easier identification of meaningful trends and development of significant insights.

In looking for simple themes, insurance company analysts should keep in mind that the purpose of customer data analysis is not to identify hard-to-see trends, but rather to confirm which of several plausible, but mutually exclusive, trends are occurring or which are changing. In addition, simpler trends are easier to confirm, thus providing the company management team with a higher level of confidence in the analysis. Appropriate responses to simple data themes tend to be easier to develop and implement, thus taking less time for the insurer to capture opportunities.

To act quickly, the insurer must have the corporate will to do so and must recognize that trends, much of the time, have very limited lives. Insurers that anticipate potential customer trends will have prepared alternative sales strategies focused on customer segments, products and prices.

Depending upon what the customer data analysis reveals, an insurer must be prepared to act on one of the strategies. Customer-segment-based strategies may provide for the company to respond to a range of customers based on their preferences related to financial, emotional and/or legal needs. Product- and service-based strategies must be driven by customer values when meaningful distinctions in customer segments are not significant. Price-based strategies are likewise dependent on customer values, particularly so when customer data indicates insurance products are considered commodities by customers.

Insurers that keep the process of collecting, storing, managing and analyzing customer data simple also enhance their ability to identify, understand and respond to appropriate opportunities. The value of customer data must be measured not only in terms of how easy it is to collect and analyze, but also in terms of how strongly it influences a company to act. Highly complex or sophisticated data is typically less user friendly in terms of collection and analysis and therefore less likely to be useful. Keeping it simple makes customer data easier to collect, analyze and act on.

Gregory JHoeg, a Best's Review columnist, is managing director of Hoeg & Co., Doylestown, Pa. lie can be reacbed at [e-mail].