The effective use of data is a key component for success in any industry, according to a top insurance executive who guest lectured at Fordham.
“Competitive advantages are driven by how you can take data and information that is available to everybody and use it in a more sophisticated fashion,” said Brian MacLean (FCRH ’75), president and chief operating officer (COO) of The Travelers Companies.
MacLean, a member of the President’s Council at Fordham, taught a portfolio management class this past spring as part of the council’s executive-in-residence series.
To show how Travelers relies on data to better serve its clients, MacLean used one of his favorite subjects—baseball; specifically, the 2003 American League Championship Series between the New York Yankees and Boston Red Sox.
In the final game of that series, Red Sox pitcher Pedro Martinez refused to come out of the game at a crucial point in the 8th inning.
“Boston is up by three runs. But then there are a couple of hits and—all of a sudden—there is one out and a runner on first,” MacLean said. “What are people thinking?”
In 2003, Pedro Martinez boasted a 2.22 ERA, an excellent average by any standard.
“He’s having a fabulous year. Do we want to leave him in?” MacLean asked. “The manager goes out to talk to Pedro; he relies on human interaction, instinct, guts. Pedro says he is staying in the game. What should have the manager been thinking about?”
Baseball is a data-rich sport, yet that manager ignored the data.
“I’m using just one simple statistic that indicates Martinez doesn’t pitch well in 8th and 9th innings anymore,” he said. “Surely the Red Sox manager knew this, too. Well, we know that in the end, [the Yankees]won the game and that Red Sox manager got fired.”
Playfully ribbing some of the Boston fans in the class, MacLean said that in this specific case, the Red Sox were justified in firing the manager.
“They should have fired him because he totally disregarded the data side of the business,” he said. “Data and information should be part of any decision process. In my job, I’m looking at managers across our organization all the time.”
MacLean said the property and casualty insurance industry, like baseball, is rife with statistics.
“When we get into our claims process, we capture all kinds of information about claimants and why accidents happen,” he said. “Yet at the end of the day, we rely more on the intuitive knowledge of our underwriters. I think for insurance, certainly, and I argue for a lot of industries, the basic concept is, ‘How do you use data?'”
Whatever the formula, Travelers, which is headquartered in Connecticut, boasted $24.5 billion in revenue and $2.9 billion in earnings for fiscal year 2008. It has been named to Forbes’ “America’s Most Admired Companies” list each year since 2006, the year after MacLean became COO.
“We feel great in this environment that we earned ($2.9 billion), which is what we worry about more than revenue,” MacLean said.
So how did MacLean, a Queens native who majored in English and art history, become president of such a successful corporation, one that he proudly boasted didn’t take one penny offered by the federal government’s Troubled Asset Relief Program?
According to MacLean, it was career restlessness.
“When I graduated in 1975, the economy was bad, but it didn’t feel as bad as it does now,” he said. “My brother got me a government job doing criminal investigations in North Carolina. It was interesting enough work; a paycheck. But I didn’t want to work in government.”
MacLean decided to get a master’s in accounting from the University of South Carolina. From there, he began his career in insurance, ending up at Travelers in the 1980s.
After a five-year stint in finance, he moved to the claims side. In 2005, he became COO.
“I always have been someone who looked for opportunities and aspired to do different things,” MacLean said. “I don’t care what job I do as long as it adds value and I am part of the group of people who decide where the company is going to go.”