Chartis Insurance (New York) has elevated data analysis to a corporate-level capability, crossing all lines of business and functional areas, with the creation of a chief science officer position. Murli Buluswar, the first to hold the role, reports directly to Chartis CEO Peter Hancock, who describes the role as helping "to enhance our focus on analytics, asking the right questions and making science-driven decisions about our strategies." Buluswar spoke with Insurance & Technology to relate what the new science office will do, what qualities he's looking for in staff, and how its data analysis mission will support not only better decision-making at various levels, but also how it may contribute to improving the insurance industry's reputation by driving broader risk management-related benefits for society.
Insurance & Technology: What is the goal of the new office you're heading as chief science officer?
Murli Buluswar, Chief Science Officer, Chartis: At a higher level, the goal is to establish a world-class research and development team whose mission is to drive greater success in Chartis' global commercial and consumer businesses, obviously with P&L in mind. Another goal is to partner with academicians and researchers to identify emerging risks with an eye to improving the lives of our customers, and society more broadly, by driving better understanding and management of risk.
I&T: What's the vision behind the chief science officer role, and where does it come from?
MB: One of the big drivers is Chartis CEO Peter Hancock's leadership and vision. He has had extraordinary success by harnessing the power of data to drive results. He had the vision to build this team of top-notch business thinkers and research scientists to forge a path forward in strategy and business impact, while having a positive impact on society more broadly.
The use of data analysis in the insurance industry has tended to be focused on the actuarial side of the business, but the opportunity is much broader than that. It can be applied to how you manage marketing, distribution, customer experience, underwriting decisions -- it has a place in every function, of the insurance enterprise. At various levels I think this is terrific opportunity for Chartis to set the gold standard for how analytics can create competitive advantage, as well as to help position the industry as a whole more favorably to consumers and within society more generally.
On one end, it's about shaping decision-making and strategy by asking smarter questions. It's also about industry-leading or shaping questions, such as emerging risks around climate change, BPA [bisphenol A, a chemical used in plastics that has been shown to be harmful], etc. -- things that might require partnering with climatologists, geologists, and other scientists. I&T: What kind of professionals do you plan to recruit to your research and development team?
MB: The first source of some of the talent is folks that have been here at Chartis and have demonstrated fundamental analytical capability and have been successfully supporting business decision-making. The broader goal is to build a team that helps drive positive change with expertise through four qualities that we've identified: IQ, EQ [emotional quotient], deep understanding of data and technology, and business operational acumen.
I&T: Will you be recruiting people with experience in P&C commercial and personal lines?
MB: Yes, but I don't think that vertical experience is as necessary as the fundamental capability. On one end of the spectrum, we're seeking to identify people who distinguished by their intellectual curiosity above all. On the other end of that continuum are experienced individuals from insurance and other verticals with a record of having driven change through adaptive thinking and their ability to connect that to how the business actually runs. It's not about whether they have a Ph.D. in statistics or that they're a member of the Society of Actuaries. That's an element of it, but the bigger one is how are they demonstrating intellectual curiosity, and how they could apply that to help forge a path forward for this $32 billion global P&C insurer.
I&T: What will be the purview of the science office. Will you be focused on things like consolidating analytics capabilities in business units, or will you be more focused in higher-level objectives?
MB: For the present we'll be organized such that the operational analytics will continue to reside in the business units. On one end of a continuum is the traditional loss modeling; on the other end we'll be responding to things like climate change in partnership with institutions such as the RAND Corporation. On a scale of one to ten, the familiar operational analytics may be a "one" and collaboration with RAND might be a 10. The sweet spot for the office is probably between four and 10. I envision that the science team will support the businesses in questions that have been asked but not addressed because of immediate burning issues or haven't been asked in the most cohesive way.
That's how we're seeing it now; obviously over time it will evolve. A few years down the road, if this team succeeds in its vision it will be a vestige of what it is now, because we will have built the team and infused it through the organization. The idea is that it will become part and parcel of how we manage our business because we appreciate the creative analytic capability.
I&T: What impact might your role have on higher-level strategic decision-making?
MB: Commercial and personal property insurance is largely about low-frequency, high-severity risk. The industry has tried with limited success is to model that risk through traditional analytic techniques. However, there remains a huge amount of volatility associated with an insurance company's finances. We hope to explore ways of thinking about risk questions differently, approaching them from a different angle while leveraging relevant data. It's more than a matter of using traditional and even non-traditional statistical analysis; it's about bringing game theory, possibly real options theory and more broadly about reshaping the approach fundamentally to gain new insight into how to manage claims and better understand low-frequency, high-value events.