What if Your Data is Actually an Expense Instead of an Asset?

Vancouver, WA – September 16, 2024 — When considering the acquisition of a new software solution, hiring additional full-time employees (FTEs), partnership with a third-party provider, or even changes to physical assets, it is often necessary for businesses to build a comprehensive cost-benefit analysis (CBA) to justify the spend to higher-ups with budget control. This is true for insurance organizations just as it is across all other industries.

Disproportionately, insurance organizations struggle harder than companies in other industries to justify the costs of data-related projects. The major stumbling block is that insurance organizations, in particular, often fail to recognize the cost of NOT being able to protect, utilize, or monetize internal data. This can mean not being able to meet growth objectives, not having access to the information needed to inform key decisions, not being able to respond expeditiously to inquiries from regulators, not knowing whether the customers perceived as most important are profitable, or not being able to protect customer data from hackers and data thieves.

The recent Salesforce ad campaign, “Ask More of AI,” takes a stab at illustrating the value of data, especially customer data. In a 60-second ad spot that first appeared in May of 2024, Matthew McConnaughey (as Salesforce) talks about the “wild, wild west of AI” and watches train robbers (representative of data thieves or hackers) steal a gold bar of customer data, including “purchase histories, financial records, chat histories,” and even one passenger’s “Q3 sales forecast.”

“They’ll do anything to get it, even daytime robbery,” says McConnaughey. “And, by the time people wake up to what’s happening, well,” he continues. “That train has left the station. Unless…unless you never let them onboard in the first place.”

With this in mind, insurance organizations work hard to protect and utilize data “assets” for critical functions and innovation initiatives, such as underwriting and AI projects. It stands to reason that one can’t go wrong investing in the protection and utilization of an organization’s most highly prized assets, right?

The assumption made in the Salesforce commercial, that data is an asset (or a gold bar), is commonly held in the insurance industry. The twist comes when one examines data with profit and loss (P&L) in mind and finds out it is clearly an expense and NOT an asset. Today, it is common for insurance organizations to spend extensively acquiring data and administering or maintaining existing data while simultaneously failing to properly organize, analyze, protect, and provide access to data for the right people at the right place and the right time.

Data Landlords

Let’s be clear, this is not a simple or linear process. Too many insurance organizations are just data landlords, housing and paying the expenses related to data maintenance without ever harvesting and deriving value from it. Opportunities to gain competitive advantages from data, such as those involving generative AI (GenAI), are only increasing. If data fundamentals are lacking, however, insurance organizations won’t be in a position to cash in, literally. And, if you aren’t the one gaining the competitive advantage, then you are losing ground.

In his book, “Atomic Habits,” James Clear illustrates the difference between motion and action. When it comes to insurance data, the industry seems committed to lots of motion, but little action. Consider the analysis of data mentioned briefly above, if the analysis simply creates a colorful dashboard or a pie chart for a board meeting, that’s motion, not action. Creating a new product to fill a hole identified in the analysis is action, but how many companies really get that far?

All this begs the question, how can data be transformed from an expense into an actual asset in 2024? To the point of the Salesforce commercial, perhaps the industry should be asking more of industry-leading data solutions as well as AI.

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