Most industry observers are beginning to understand that data is becoming the next great natural resource and will inform most business decisions in the future. So expanding the "data mining" metaphor into the "digital gold rush" seems perfectly apt. Today's digital data are the valuable nuggets and thousands of fortune seekers are flocking to virtual goldfields to pan for these grains of insight and meaning in the myriad Big Data streams in which they exist. And the Internet of Things is set to generate more and larger streams of data points which will be invaluable to insurance carriers.
There is a virtual "land grab" underway, in which "miners" from diverse backgrounds are acquiring numerous disparate tracts of data in a race to gather and aggregate these properties for use in developing high value information products of the future.
M&A and investment strategies being pursued by new and non-traditional data management and technology players, some of whom are expanding from their traditional financial market segments in banking, lending and financing to adjacent insurance markets – and who have combined risk management and sophisticated analytics expertise with robust and diverse industry database services – include;
• CoreLogic's 2014 purchase of catastrophe modeling firm Eqecat following its 2013 acquisition of property data provider Marshall & Swift/Boeckh, a significant minority interest in Symbility, provider of cloud-based and smartphone/tablet-enabled property claims technology for the property and casualty insurance industry as well as the credit and flood services units of DataQuick, all significantly expanding their insurance market penetration with these new data and analytics capabilities.
• Venture backed SNL Financial's 2014 purchase of business intelligence and analytics firm iPartners, a SaaS-based business intelligence reporting solutions provider to P&C and Life companies.
• Verisk Analytics' 2014 acquisition of property image data provider EagleView Technology, a digital aerial property imaging and measurement solution which will significantly enhance their Xactware claims estimating solution capabilities through the integration of aerial imagery data.
• LexisNexis Risk Solutions' 2013 acquisition of Mapflow, a geographic risk assessment chronology company with solutions that complement the other data, advanced analytics, supercomputing platform and linking capabilities offered by LexisNexis Risk Solutions, part of Reed Elsevier, a leading global provider of professional information solutions. The May 2014 acquisition of U.K based Wunelli brings unique data assets and experience with hundreds of millions of miles of telematics data which will advance their existing telematics offering.
[Previously from Applebaum: 6 key insurance business impacts from analytics]
Other 2013/2014 transactions that have broader implications for the insurance analytics and information technology ecosystem;
• Guidewire Software, Inc., a provider of core management system software and related products for property & casualty insurers, acquired Millbrook, Inc., a provider of data management and business intelligence and analytic solutions for P&C insurers.
• IHS, a global leader in critical information and analytics, acquired automotive information database provider R.L. Polk & Co. who also own the vehicle history report provider Carfax.
• FICO, a leading provider of analytics and decision management technology acquired Infoglide Software, a provider of entity resolution and social network analysis solutions used primarily to improve fraud detection, security and compliance and InfoCentricity, an innovative SaaS-based predictive analytics software and solutions provider.
• Private equity-backed TransUnion, provider of risk management solutions to financial services firms including insurers, acquired TLO which provides insurers with innovative, powerful investigative and risk management vehicle and driver information
• Private equity-backed CCC Information Services, a database, software, analytics and solutions provider to the auto insurance claims and collision repair markets, acquired Auto Injury Solutions, a provider of auto injury medical review solutions which follows their earlier acquisition of Injury Sciences who provide insurance carriers with scientifically based analytic tools to help identify fraudulent and exaggerated injury claims associated with automobile accidents
• Private equity-backed Mitchell International, a provider of technology, connectivity and information solutions to the P&C claims and collision repair industries acquired FAIRPAY Solutions which include workers' compensation, liability and auto cost containment and payment integrity services which will expand Mitchell's solution suite of bill review and out-of-network negotiation services and complements its acquisition of National Health Quest in 2012
• The ongoing series of U.S. and foreign automotive service industry and data acquisitions by Solera Inc. including the Insurance and Services Division of PPG (including Lynx, GTS & Glaxis), AutoPoint (U.S.)and AutoSoft (Italy) in 2014 and Distribution Services Technologies Inc., Services Repair Solutions Inc., Serinfo (Chile), Pusula Otomotiv (Turkey), EziWorks/CarQuote (Australia) and HyperQuest (U.S.) in 2013. Since its initial public offering in 2007, originally backed by private equity firm GTCR Golder Rauner, Solera has completed 25 acquisitions globally and grown revenue to almost $1 billion.
The most ultimately disruptive group of technologies of all is the rapidly emerging "Internet of Things" – much of which is controlled today by industry outsiders –and its potential impact on numerous aspects and multiple lines of insurance. Of related concern to the insurance industry should be the potential for these "outsiders" to leverage this valuable information to enter the business and become competitors. Some of the related acquisitions include Facebook's purchase of the fitness and location app Moves, Monsanto's acquisition of crop insurance and data company Climate Corp. (which was started by former Google executives) and Google's acquisition of the connected home devices and security company Nest. The data generated by all of these businesses – never before so digitally available – can be combined with advanced analytics to accurately establish and manage individual and property risks.
The ability to successfully acquire, control and effectively translate and utilize all of this data as actionable information will determine the insurance industry's digital gold rush winners and losers of the future.
About the author: Stephen Applebaum is a subject matter expert and thought leader providing consulting, advisory and strategic M&A services to participants in the North American P&C insurance ecosystem covering insurance information technology, claims, innovation, supply chain, vendor and performance management. As Senior Advisor to StoneRidge Advisors, an investment banking and advisory firm exclusively focused on insurance claims and services, he is working with the firm to expand their insurance technology M&A advisory and consulting services. Previously, Stephen was Senior Analyst, Property & Casualty Insurance at Aite Group.