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In the latest example of insurance core systems’ focus on the integration of advanced data capabilities into their systems portfolios, Insurity (Hartford) has acquired Valen Analytics, a Denver-based provider of cloud-based proprietary data, analytics and predictive modeling solutions for property/casualty insurers. Insurity declined to share the terms of the deal, which has been concluded. Valen will operate autonomously as a wholly owned subsidiary of Insurity as Valen Analytics, an Insurity Company, under its existing management team, led by CEO Dax Craig, according to Lani Cathey, SVP, Insurity.
“The evolution of the personal and small commercial insurance markets is a focal point of incumbents and new entrants alike, and a contributory [data] approach will help propel the capabilities of insurers who want to assert their relevance in delivering a modern customer experience.” Comments Dax Craig president and CEO, Valen. “Valen is honored to join Insurity, a company who understands the needs of P/C insurers, and how important it is to make decisions supported by data analytics.”
Complementing Insurity’s IEV Offering
The deal falls within an industry consolidation trend focusing on the acquisition of data capabilities, and within Insurity’s strategy it falls within the context of the vendor’s bet on its very successful Insurance Enterprise View (IEV) data integration, reporting and analytics solution, which the vendor designated as distinct business unit in June 2016.
“The convergence trend in continuing with core system vendors expanding the breadth and depth of the services offered,” comments Karen Furtado, Partner, SMA. “Insurity has been very active in the space expanding its core capabilities and now augmenting the IEV solution with Valen’s consortium data. This supports the trend of bringing analytics closer to the real-time transactional process.”
Insurance core systems replacement activity in property/casualty remains high, but forward-looking suite vendors are thinking about other ways they to support their growing client-bases once core systems needs are met and insurers a still struggling to catch up with consumer expectations and other technological advances, suggests Matthew Josefowicz, CEO, Novaria. “Analytics and digital are two areas that insurers will continue to invest in once their core systems are on track, and core suite vendors will be well positioned to meet these needs, if they have appropriate offerings in their portfolios,” he says.
As an autonomous business unit that integrates with Insurity’s core solutions, “this is the strategy Insurity followed for IEV, an analytics solution which is separate from its core PAS suite offerings,” Josefowicz adds.
Addressing the Industry’s Analytics Lag
The insurance industry has always been data-rich, but continues to lag in the adoption of advanced analytics and predictive models throughout the enterprise, according to Deb Smallwood, founder, SMA. Valen was one of the first startups with specific workers’ compensation predictive models and has expanded to offer contributory, consortium-derived data, she notes.
“The challenge for Valen has not been the quality of the analytic model but the volume of data and the challenge of insurers embracing predictive models in the business operations—especially underwriting,” Smallwood says. “Now with Insurity’s large base of workers’ comp and other commercial clients, along with investment power—Valen is perfect match. Watch for marrying the two entities, expanding the consortium of data and seeing the integration of predictive models into underwriting and claims.”
Practical Use Arena for Predictive Analytics, Real-Time Scoring
Valen’s contributory model was an important differentiator as Insurity was evaluating the acquisition opportunity, according to Lani Cathey, SVP, Insurity. “We hear from customers and industry commentators about the need for analytics and the challenges of implementation, and so we are providing an avenue for our customers to have access to the power of predictive analytics in a practical use arena,” she says. “The power is a robust contributory data asset integrated into the policy underwriting workflow.”
Recent Novarica research shows that more than half of insurers are using real-time scoring today, and more than a quarter are planning pilot programs this year, Novarica’s Josefowicz notes. “Solutions like Valen that unite insurance data and proven analytic models are likely to be in high demand,” he predicts. “This acquisition adds a new cloud-based component which can cross Insurity’s broad portfolio of core systems and enterprise data offerings.”
Bold Move for Insurity, Evolution Opportunity for Valen
This acquisition represents what Celent Research Director Karlyn Carnahan characterizes as another bold move for Insurity as it continues to vertically integrate across the insurance business. “It will strengthen their competitive marketplace position and complement the existing portfolio of products while adding new, key capabilities for their clients,” she says. “Valen will benefit from being able to leverage the additional resources provided by Insurity to continue expanding their solution offerings and accelerate growth.”
Aggressive Acquisition Strategy
“Insurity’s strategy is coming to fruition, and we’re very excited about the value-add provided through the acquisition, as well as helping Valen to grow and scale with the resources of Insurity behind it,” Cathey comments.“We have joint customers within Tropics and also Insurity proper. The deal has a lot of synergies, including a common focus across workers’ comp and existing pre-integration of Valen with Tropics Breeze [Insurity’s workers’ compensation core suite].”
“Insurity will continue to grow through acquisitions in line with our strategy to offer a portfolio of solutions to address the unique needs of our customers and the market,” Cathey adds. “More to come.”