Sergej Khackimullin - Fotolia
Master data management strategies have found a home in the insurance industry. As a discipline that demands centralization and uniformity, insurance needs MDM to consolidate data across applications and systems within enterprises.
Data is essential for modern insurers to function and understand their clientele and what makes their company successful. But with different departments accumulating similar data sets or not communicating what they know, insurers sought a new approach.
But master data management (MDM) requires the right data and any successful deployment depends on the right approach. When it comes to master data management best practices, companies understand the needed investment and commitment this discipline requires.
Breaking down MDM
Typically, MDM is defined as a technology-enabled discipline for businesses and IT organizations in which enterprises work together to ensure the uniformity, accuracy and accountability of a shared master data asset.
An MDM approach is one that pools all customer information together and distributes it to customer-facing systems. This is in opposition to a traditional approach in which data gathered from different departments of the same enterprise are not shared, increasing the potential for duplication.
"We are seeing a focus on digital transformation, the delivery of exceptional customer experiences, operational agility and product innovation as examples of corporate strategies that all require a solid foundation of master data management," said Malcolm Hawker, senior director analyst at Gartner.
MDM can benefit insurers by putting them in a better position to launch the aforementioned strategies. Through a transition to this discipline, companies can provide better service to their customers, operate in a more agile way and innovate more easily because of the centralization of data that MDM demands.
Hawker has found that data and analytics leaders that support the revenue generation and operational efficiency of these strategies are using MDM to provide the data used to deliver these priorities.
The key to this approach is the accumulation of high-quality data. As with many things in the insurance industry, operators are reliant on their data being accurate.
"Reliable customer and vendor master data is the foundation for much of these end-to-end processes, governing which organizations [to] do business with, how they do it, and how or when either party gets paid," said Danny Thompson, SVP of market and product strategy at Apex Analytix.
There is potential with MDM, but, as with most things, there is risk involved. Business value is not guaranteed through an investment in MDM. For insurers to successfully embrace the discipline, a significant amount of planning and groundwork are necessary. MDM can't be in addition to another strategy but rather the fulcrum on which a business plan pivots.
MDM is built to help reduce business risk and fraud, avoid duplicate payments, achieve better spend analytics and operate with greater efficiency.
Lack of meaningful or prolonged executive sponsorship, failure to quantify the expected outcomes and inadequately focusing on data governance can all make insurance companies less likely to deliver business value from an investment in MDM, Hawker said.
With the proper amount of investment and attainable goals, insurers can see positive impacts from MDM.
"First, insurance companies need to compare their vendor and customer master data with authoritative sources of correct data in order to identify gaps and errors, and then actually amend and correct the data as flaws are found," Thompson said. "Second, they need to ensure every captured record is complete and accurate when it is added. Finally, they need to continuously monitor vendor master data for regulatory risks, fraud and vendor changes."
When it comes to claims-related data, MDM for insurers can accelerate the process of payments to customers and optimize their relationships with vendors and suppliers, as well as improve customer satisfaction.
"Effective mastery of claims-related data can have significant positive impacts on insurers -- particularly when it comes to understanding the full breadth of the relationship between the insurer and all parties to the claim," Hawker said.
Having a centralized repository for all data gathered by the insurance company begets easier search for important details between the company and vendors and customers. MDM can also add levels of automation for claims processing, provide aggregated and full views of relationships across systems and businesses and make claim submissions easier.
"It can also improve the customer experience by enabling insurance companies to make it easier and faster for customers to interact with them," Hawker said. "Gartner is seeing insurance companies large and small leverage MDM for their competitive advantage."