Data mining is the land of what if in insurance: What if we tried to target policies to residents of this community? What if we eliminated this line of business? Most business analysts would have blanched at answering those questions a mere few years ago, but those with data mining tools and the imagination to understand its capabilities are finding the information they need to make wise decisions.

Overall, I dont think insurance carriers leverage their data as well as they can by utilizing data mining, says Craig Lowenthal, vice president and CIO of Hartford Financial Products, a unit of The Hartford. They can look at customer trends closer than they currently do and determine what product lines or coverages to get in or out of. Or even the type of industries they want to insure.

Many companies use data mining as a marketing tool. Mark Kreyenhagen, director of database marketing for Western-Southern Life in Cincinnati, believes it has changed the focus of the insurance home office. We werent a very strong marketing arm for our sales reps to use, Kreyenhagen says. The home office processed policies and paid claims. It hadnt figured out what to do with all the data. The first step taken by Western-Southern was to begin aggregating the data sales reps were collecting before those reps walked out the door. We needed to keep that in-house so when the reps left and the next person started, we could just transfer that information to the next person, he says.