Verisk Analytics: Repurposing Data to Deliver Unique Customer Value
“In God we trust, all others must bring data.” – W. Edwards Deming
Verisk Analytics is a $13B market cap data and analytics firm that helps customers manage their assets and the associated risks. The firm’s ability to collect, analyze, develop, and deliver information in new and innovative ways is made possible due to its effectiveness in aligning its business model and its operating model. Originally founded as a data collective for insurance agencies to pool statistics, claims, and other information, it has since expanded into adjacent markets with strong vertical expertise across financial services, energy, healthcare, and specialized services. Leveraging a unique set of proprietary databases containing multiple petabytes worth of information, Verisk provides a broad array of solutions that are deeply embedded in customer workflows.
Verisk’s business model is predicated on the concept of “build once, sell many times” providing the foundation for a highly scalable business with high incremental margins and low capital intensity. Customers range from top P&C insurance providers to credit card issuers to health care providers who use online portals to access tools, models, reports, and analysis related to their specific area of interest. With nearly 75% of revenues tied to their subscription business, Verisk is able to draw upon its SaaS delivery model to mine data from the transactions (e.g. claims searches, etc.) supported by its solutions. Coupled with contributory data from customers, public sources, data gathered by in the field, and purchased data, Verisk has built out a huge volume of complimentary time-series information that serves as a high barrier to entry across verticals.
Growth is driven not only by new customers and the upsell and cross-sell of existing customers, but also from innovative new solutions derived from the repurposing of its data assets (n+1). As it has expanded its market capabilities, Verisk can now provide even more analysis around cross-vertical themes. For example, catastrophe modeling software that was once used to assess the financial implications of natural disasters for the P&C market can now be applied to understand the risks associated with owning an oil field near a fault line or hurricane zone.
People: The data that Verisk has aggregated is meaningless without the interpretation and analysis that goes with it, and as such, the firm has focused on hiring individuals with deep industry expertise. Many of their technically-oriented employees have been recruited out of the domains they now serve with skilled professionals ranging from in-house actuaries and chartered underwriters to PhDs in mathematics and statistical modeling.
CEO Scott Stephenson recently set the tone from the top that data and analysis is the lifeblood of the firm by requiring 50-60 of his top level executives to participate in a data analytics boot camp. Additionally, as a way to secure talent in a tight market Stephenson established partnerships with three of the top universities offering graduate programs in data science to aid in the firm’s recruiting efforts.
Process: Verisk has established a repeatable process stemming from its deep relationships with customers and its capabilities around large-scale data integration which supports the firms philosophy of “build once, sell many times.” This is made possible by the the structure of its internal teams including its Joint Development Environment (JDE) and its Enterprise Data Management (EDM) groups which are tasked with creating new information and products from available data and exploring new ways of data collection.
Technology: Verisk manages two main corporate data centers with additional data centers devoted to specific business units located in other states. High speed networks and computing power are key to managing their sheer volume of data while engineers are focused on maintaining excellence in ETL to optimize database usage. Much of Verisk’s vertical expansion has been the direct result of acquisition and the firm is currently in the process of developing a common database and GIS platform with its JDE group to foster even greater product innovation.
Performance and Competitive Advantage:
Data is Verisk’s #1 asset, but without a business model and an operating model that reinforce one another, the firm would not be able to leverage its data to deliver unique value to its customer. While most competitors provide a single point solution, Verisk has taken a multi-vertical strategy that draws on information across a variety of industries to provide an unrivaled breadth of solutions. This strengthens their relationship with customers allowing them to maintain price while further innovation drives continued growth. As such, the firm has experienced impressive financial performance delivering high single digits topline growth over the past few years with EBIT margins in the high 40s.
“Investor Day 2015.” Verisk Analytics investor presentation. March 5, 2015. Retrieved from http://investor.verisk.com/phoenix.zhtml?c=224676&p=irol-calendar
Stephenson, S. (2014, December 12). Company meeting.
Verisk Analytics. (2014). Annual Report 2014. Retrieved from http://investor.verisk.com/phoenix.zhtml?c=224676&p=irol-financial
Verisk Analytics. “Earthquake Risk in Greece.” October, 2014. Accessed December 09, 2015.