It may be surprising to know that U.S. natural catastrophe economic losses totaled $119 billion in 2020, and 75% (or $89.4B) of those economic losses were caused by severe storms and cyclones. In the insurance industry, data is everything. Insurers use data to influence underwriting, rating, pricing, forms, marketing, and even claims handling. When fueled by good data, risk assessments become more accurate and produce better business results. To make this possible, the industry is increasingly turning to predictive analytics, which uses data, statistical algorithms, and machine learning (ML) techniques to predict future outcomes based on historical data. Insurance firms also integrate external data sources with their own existing data to generate more insight into claimants and damages. Google Cloud Public Datasets offers more than 100 high-demand public datasets through BigQuery that helps insurers in these sorts of data “mashups.” 

One particular dataset that insurers find very useful is Severe Storm Event Details from the U.S. National Oceanic and Atmospheric Administration (NOAA). As part of the Google Cloud Public Datasets program and NOAA’s Public Data Program, this severe storm data contains various types of storm reports by state, county, and event type—from 1950 to the present—with regular updates. Similar NOAA datasets within the Google Cloud Public Datasets program include the Significant Earthquake Database, Global Hurricane Tracks, and the Global Historical Tsunami Database.  

In this post, we’ll explore how to apply storm event data for insurance pricing purposes using a few common data science tools—Python Notebook and BigQuery—to drive better insights for insurers.

Predicting outcomes with severe storm datasets

For property insurers, common determinants of insurance pricing include home condition, assessor and neighborhood data, and cost-to-replace. But macro forces such as natural disasters—like regional hurricanes, flash floods, and thunderstorms—can also significantly contribute to the risk profile of the insured. Insurance companies can leverage severe weather data for dynamic pricing of premiums by analyzing the severity of those events in terms of past damage done to property and crops, for example. 

It’s important to set the premium correctly, however, considering the risks involved. Insurance companies now run sophisticated statistical models, taking into account various factors—many of which can change over time. After all, without accurate data, poor predictions can lead to business losses, particularly at scale.  

The Severe Storm Event Details database includes information about a storm event’s location, azimuth (an angle measurement used in celestial coordination), distance, impact, and severity, including the cost of damages to property and crops. It documents:

• The occurrence of storms and other significant weather events of sufficient intensity to cause loss of life, injuries, significant property damage, and/or disruption to commerce.
• Rare, unusual weather events that generate media attention, such as snow flurries in South Florida or the San Diego coastal area.
• Other significant weather events, such as record maximum or minimum temperatures or precipitation that occur in connection with another event.

Data about a specific event is added to the dataset within 120 days to allow time for damage assessments and other analysis.

Driving business insights with BigQuery and notebooks

Google Cloud’s BigQuery provides easy access to this data in multiple ways. For example, you can query directly within BigQuery and perform analysis using SQL. 

Another popular option in the data science and analyst community is to access BigQuery from within the Notebook environment to intersperse Python code and SQL text, and then perform ad hoc experimentation. This uses the powerful BigQuery compute to query and process huge amounts of data without having to perform the complex transformations within the memory in Pandas, for example.

In this Python notebook, we have shown how the severe storm data can be used to generate risk profiles of various zip codes based on the severity of those events as measured by the damage incurred. The severe storm dataset is queried to retrieve a smaller dataset into the notebook, which is then explored and visualized using Python. Here’s a look at the risk profiles of the zip codes:

Another Google Cloud resource for insurers is BigQuery ML, which allows them to create and execute machine learning models on their data using standard SQL queries. In this notebook, with a K-Means Clustering algorithm, we have used BigQuery ML to generate different clusters of zip codes in the top five states impacted by severe storms. These clusters show different levels of impact by the storms, indicating different risk groups. 

The example notebook is a reference guide to enable analysts to easily incorporate and leverage public datasets to augment their analysis and streamline the journey to business insights. Instead of having to figure out how to access and use this data yourself, the public datasets, coupled with BigQuery and other solutions, provide a well-lit path to insights, leaving you more time to focus on your own business solutions.

Making an impact with big data

Google Cloud’s Public Datasets is just one resource within the broader Google Cloud ecosystem that provides data science teams within the financial services with flexible tools to gather deeper insights for growth. The severe storm dataset is a part of our environmental, social, and governance (ESG) efforts to organize information about our planet and make it actionable through technology, helping people make a positive impact together. 

To learn more about this public dataset collaboration between Google Cloud and NOAA, attend the Dynamic Pricing in Insurance: Leveraging Datasets To Predict Risk and Price session at the Google Cloud Financial Services Summit on May 27. You can also check out our recent blog and explore more about BigQuery and BigQuery ML.

Japan is home to millions of vending machines installed on streets and in buildings, sports stadiums and other facilities. Vending machine owners and operators, including beverage manufacturers, stock these machines with different product combinations depending on location and demand. For example, they primarily display coffee and energy drinks in machines placed in offices and sports drinks and mineral water in machines at sports facilities. The combinations also vary by season: for example, owners and operators may display cold beverages in summer and hot beverages in winter. 

Traditionally, vending machine operators have relied on the intuition and experience of sales managers to determine the optimum product mix for each vending machine. However, in recent years, manufacturers such as Coca-Cola Bottlers Japan (CCBJ) have turned to data to analyze and make strategic decisions about when and where to locate products in machines.

CCBJ is the number one Coca-Cola bottler in Asia and vending machines comprise the bulk of its business. The organization operates about 700,000 machines across Tokyo, Osaka, Kyoto, and 35 prefectures. Minori Matsuda, Google Developer Expert and also Data Science Manager at CCBJ, says “The billions of data records collected from 700,000 physical devices are a great asset and a treasure trove we can take advantage of.”

Minori points out that when considering the mix of products in vending machines in sporting facilities, the managers naturally assume sports drinks would generally sell well. However, analysis of purchase data – including hot drinks and hot drinks plus sports drinks – found many parents purchased sweet drinks such as milk tea when they attended games or sessions involving their children.  “Analyzing data gives us new discoveries and, by using catchy storytelling techniques from exploratory data analysis, we are instilling a data culture within our company,” he says. “It’s worth creating by looking at facts rather than making assumptions!”

Minori believes that to analyze the vast amount of data collected from more than 700,000 vending machines, the business needs a powerful analytical platform. However, until recently, CCBJ had to extract data for analysis from its core systems, load this data into a warehouse it created and perform the required analyses.  The billions of records of data generated across the fleet – including transaction data – exposed some challenges for traditional analysis platforms. They could not efficiently process data at a considerable scale: it could take a day to return results and required extensive maintenance due to the size.

CCBJ considered building a machine learning (ML) platform as a layer on top of existing systems in August 2020 and opted for Google Cloud the following month.  “I feel that Google Cloud has an edge in all products and is very well thought out,“ says Minori, noting the scalability and cost of the platform allow the business to take a ‘trial and error’ approach to achieve the best outcomes from ML. Google Cloud also delivered the required visibility and flexibility to help the business deliver change every day against key performance indicators. 

MLOps platform streamlines ML pipeline development

CCBJ built its analysis platform using Vertex AI (formerly AI Platform) centered on a BigQuery analytics data warehouse, and partly using AutoML for tabular data. “We have created a prediction model of where to place vending machines, what products are lined up in the machines and at what price, how much they will sell, and implemented a mechanism that can be analyzed on a map,” says Minori, adding that building the platform with Google Cloud was not difficult. “We were able to realize it in a short period of time with a sense of speed, from platform examination to introduction, prediction model training, on-site proof of concept to rollout.”

The new data analytics platform of CCBJ consists of the following parts:

Data Sources

• The data collected from the vending machines are all stored on BigQuery.

Data Discovery and Feature Engineering

• Minori and other data scientists at CCBJ are using Vertex Notebooks, where they access the data on BigQuery by executing SQL queries directly from the Notebooks. This environment is used for the data discovery process and feature engineering. 

ML Training

• For ML training, CCBJ uses AutoML for Tabular data, Custom model training on Vertex AI, and BigQuery ML. AutoML gives model performance with AUC curves and also feature importance graphs.

ML Prediction and Serving

• For ML prediction, CCBJ uses Online Prediction for AutoML models and Online Prediction for custom models for real-time prediction when the salesperson finds the interesting point
• Batch Prediction is used for generating a large prediction map that covers the whole country
• The prediction results are distributed to sales managers’ tablets

CCBJ started constructing the platform in September 2020, and completed it within a month. The business has conducted proofs of concept at its base in Kyoto since February 2021, and since April, has rolled out the platform to sales managers in 35 prefectures in one metropolitan area. “Data analysis is built into the day-to-day routines of sales managers with 100% utilization,” says Minori. “They can utilize the prediction results on tablets that were able to achieve pretty high accuracy from the start.”

The hardest part was the education of sales managers in the field; having them understand the reasoning behind the ML prediction results for particular outcomes, so they could be convinced to make use of the results. “For example, regarding a new installation location predicted by the model, it seemed that there was no effective information for installation from the map information, but when I actually went there, there was a motorcycle shop and it was a place where young people who like motorcycles gathered,” says Minori. “Or there is a small meeting place where the elderly in the neighborhood are active. 

“In many cases, new discoveries that cannot be understood from map information alone can be derived from the data.”

Minori also points to a phenomenon whereby humans pursued and confirmed factors inferred by the model – meaning that once they experienced analysis and it worked effectively, they asked why the same type of analysis or prediction could not be undertaken next time. The resulting cycle of more inquiries generated, more information gathered and more data captured for analysis meant the accuracy of results was improved.

Minori describes Vertex AI as having a number of strengths in helping CCBJ build a ML data analysis platform. “One of the major merits of Vertex AI was that we were able to realize MLOps that streamlines the entire development life cycle from construction of the ML pipeline to its execution,” he says.

With near real-time data analysis through Google Cloud, CCBJ teams can spend time developing strategies rather than waiting for data requested from the IT systems department. Exploratory data analysis is also considerably easier as repeated trial and error has greatly improved the accuracy of analyses. Before we used Machine Learning, most machine placement processes were done by human senses, by looking at a map to find the suggestion points. By using Machine Learning to generate a massive number of placement point suggestions, the efficiency of routing of salespeople has been dramatically improved. 

In the future, CCBJ aims to automate the continuous training pipeline with Vertex AI. “CCBJ is a tech company that operates in the food industry,” says Minori. With the organization operating a vending machine network of 700,000 units, it would like to create new businesses based on utilization and analyzing data. Some of these businesses may be based on Sustainable Development Goals (SDGs) initiatives such as the utilization of recycled PET bottles, measures to prevent food loss and ways of using vending machines to contribute to local communities, which we have been working on for some time. It would be interesting if we could collaborate with Google Cloud on these in the future.”

Every organization has its own unique data culture and capabilities. Yet each is expected to use technology trends and solutions in the same way as everyone else. Your organization may be built on years of legacy applications, you may have developed a considerable amount of expertise and knowledge, yet you may be asked to adopt a new approach based on a technology trend. On the other hand, you may be on the other side of the spectrum, a digitally native organization built with engineering principles from scratch without legacy systems but expected to follow the same principles as process driven, established organizations. The question is, should we treat these organizations in the same way when it comes to data processing? In this series of blogs and papers this is what we are exploring: how to set up an organization from the first principles from data analyst, data engineering and data science point of view. In reality, there is no such organization that is solely driven by one of these but it is likely to be a combination of multiple types. What type of organization you become is then driven by how much you are influenced by each of these principles. 

When you are considering what data processing technology encompasses, take a step back and make a strategic decision based on your key goals. This can be whether you optimize for performance, cost, reduction in operational overhead, increase in operational excellence, integration of new analytical and machine learning approaches. Or perhaps you’re looking to leverage existing employees’ skills while meeting all your data governance and regulatory requirements. We will be exploring these different themes and will focus on how they guide your decision-making process. You may be coming from technologies which are solving some of the past problems and some of the terminologies may be more familiar, however they don’t scale your capabilities. There is also the opportunity cost of prioritizing legacy and new issues that arise from a transformation effort, and as a result your new initiative can set you further behind on your core business while you play catch up to an ever changing technology landscape. 

Data value chain

The key for any ingestion and transformation tool is to extract data from a source and start acting on it. The ultimate goal is to reduce the complexity and increase the timeliness of the data. Without data, it is impossible to create a data driven organization and act on the insights. As a result, data needs to be transformed, enriched, joined with other data sources, and aggregated to make better decisions. In other words, insights on good timely data mean good decisions.

While deciding on the data ingestion pipeline, one of the best approaches is to look into the volume of data, the velocity of the data, and type of data that is arriving. Other considerations include the number of different data sources you are managing, whether you need to scale to thousands of sources using generic pipelines, whether you want to create one generic pipeline but then apply data quality rules and governance. ETL tools are ideal for this use case as generic pipelines can be written and then parameterized. 

On the other hand, consider the data source. Can the data be directly ingested without transforming and formatting the data? If the data does not need to be transformed and can be ingested directly into the data warehouse as a managed solution. This not only reduces the operational costs but also allows for more timely data delivery. If the data is coming in through an unstructured format such as XML or in a format such as EBCDIC and needs to be transformed and formatted, then a tool with ETL Capabilities can be used depending on the speed of the data arrival. 

It is also important to understand the speed and time of arrival of the data. Think about your SLAs and time durations/windows that are relevant for your data ingestion plans. This would not only drive the ingestion profiles but would also dictate which framework to use. As discussed above, velocity requirements would drive the decision-making process.

Type of Organization

Different organizations can be successful by employing different strategies based on the talent that they have. Just like in sports, each team plays with a different strategy with the ultimate goal of winning. 

Organizations often need to decide on what’s the best strategy to take in respect to data ingestion and processing – whether you need to hire an expensive group of data engineers, or exploit your data wizards and analysts to enrich and transform data that can be acted on, or whether it would be more realistic to train the current workforce to do more functional/high value work rather than to focus on building generally understood and available foundational pieces.

On the other hand, the transformation part of ETL pipelines as we know it, dictates where the load will be. All of these are made a reality in the cloud native world where data can be enriched, aggregated, and joined. Loading data into a powerful and modern data warehouse means that you can already join and enrich the data using ELT. Consequently, ETL isn’t really needed in its strict terms anymore if the data can be loaded directly into the data warehouse.

All of the above was not possible in the traditional, siloed, and static data warehouses and data ecosystems whereby systems would not talk to each other or there were capacity constraints in respect to both storing and processing the data in the expensive Data Warehouse. This is no longer the case in the BigQuery world as storage is now cheap and transformations are now much more capable without constraints of virtual appliances. 

If your organization is already heavily invested into an ETL tool, one option is to use them to load BigQuery and transform the data initially within the ETL tool. Once the as-is and to-be are verified to be matching, then with the improved knowledge and expertise one can start moving workloads into BigQuery SQL, and effectively do ELT. 

Furthermore, if your organization is coming from a more traditional data warehouse that extensively relies on stored procedures and scripting, then the question that one may ask is, do I continue leveraging these skills and expertise and use these capabilities that are also provided in BigQuery? ELT with BigQuery is more natural, similar to what’s already in Teradata BTEQ, Oracle PL/SQL but migrating from ETL to ELT requires changes. This change then enables exploiting streaming use cases, such as real-time use cases in retail. This is because there is no preceding step before data is loaded and made available.

Organizations can be broadly classified under 3 types as Data Analyst Driven, Data Engineering driven, and Blended organization. We will be covering a Data Science driven organization within the Blended category.   

Data Analyst Driven

Analysts understand the business and are used to using SQL/spreadsheets. Allowing them to do advanced analytics through interfaces that they are accustomed to enables scaling. As a result, easy to use ETL tooling to bring data quickly into the target system becomes a key driver. Ingesting data directly from a source or staging area then also becomes critical as it allows analysts to exploit their key skills using ELT and increases timeliness of the data. This is commonplace with traditional EDWs and realized by extended capabilities of using Stored Procedures and Scripting. Data is enriched, transformed, and cleansed using SQL and ETL tools act as the orchestration tools. 

The capabilities brought by cloud computing on separation of data and computation changes the face of the EDW as well. Rather than creating complex ingestion pipelines, the role of the ingestion becomes, bringing data close to the cloud, staging on a storage bucket or on a messaging system before being ingested into the cloud EDW. This then releases data analysts to focus on looking into data insights using tools and interfaces that they are accustomed to. 

Data Engineering / Data Science Driven 

Building complex data engineering pipelines is expensive but enables increased capabilities. This allows creating repeatable processes and scaling the number of sources. Once complemented with cloud it enables agile data processing methodologies. On the other hand, data science organizations allow carrying out experiments and producing applications that work for specific use cases but are not often productionised or generalized. 

Real-time analytics enables immediate responses and there are specific use cases where low latency anomaly detection applications are required to run. In other words, business requirements would be such that it has to be acted upon as the data arrives on the fly. Processing this type of data or application requires transformation done outside of the target.

All the above usually requires custom applications or state-of-the-art tooling which is achieved by organizations that excel with their engineering capabilities. In reality, there are very few organizations that can be truly engineering organizations. Many fall into what we call here as the blended organization.  

Blended org

The above classification can be used on tool selection for each project. For example, rather than choosing a single tool, choose the right tool for the right workload, because this would reduce operational cost, license cost and use the best of the tools available. Let the deciding factor be driven by business requirements: each business unit or team would know the applications they need to connect with to get valuable business insights. This coupled with the data maturity of the organization would be the key to making sure the right data processing tool would be the right fit. 

In reality, you are likely to be somewhere on a spectrum. Digital native organizations are likely to be closer to being engineering driven, due to their culture and business that they are in. However, brick and mortar organizations would be closer to being analyst driven due to the significant number of legacy systems and processes they possess. These organizations are either considering or working toward digital transformation with an aspiration of having a data engineering / software engineering culture like Google. 

The blended organization with strong skills around data engineering, would have built the platform and built frameworks, to increase reusable patterns would increase productivity and then reduce costs. Data engineers focus on running Spark on Kubernetes whereas infrastructure engineers focus on container work. This in turn provides unparalleled capabilities as application developers focus on the data pipelines and even the underlying technologies or platforms changes code stays the same. As a result, security issues, latency requirements, cost demands and portability are addressed at multiple layers. 

Conclusion – What type of organization are you?

Often an organization’s infrastructure is not flexible enough to react to a fast changing technological landscape. Whether you are part of an organization which is engineering driven or analyst driven, organizations frequently look at technical requirements that inform which architecture to implement. But a key, and frequently overlooked, component needed to truly become a data-driven organization is the impact of the architecture on your data users. When you take into account the responsibilities, skill sets, and trust of your data users, you can create the right data platform to meet the needs of your IT department as well as your business.

To become a truly data-driven organization, the first step is to design and implement an analytics data platform that meets your technical and business needs. The reality is that each organization is different and has a different culture, different skills, and capabilities. Key is to leverage its strengths to stay competitive while adopting new technologies when it is needed and as it fits to your organization. 

To learn more about the elements of how to build an analytics data platform depending on the organization you are, read our paper here.

Backup and DR data is a valuable business asset, and ensuring that it’s safe and accessible is essential. In particular, you want to be able to monitor your backups to ensure that the data is indeed protected and that you can quickly recover it in the event of a disaster, user error, or failed upgrade.

Users of Google Cloud’s Backup and DR service often ask:

1. What are the best practices for monitoring my backup and recovery jobs?
2. How can I proactively identify issues and troubleshoot? 
3. How can I create alerts and be notified about important events? 

The good news is that Google Cloud Backup and DR now integrates with Cloud Logging and Cloud Monitoring tools. Now, you can monitor backup events, jobs, appliance health, resource consumption and user actions in the same way you monitor other Google Cloud workloads and services. 

With this integration, you can now:

• Monitor events related to backup and restore – With detailed Google Cloud Backup and DR service event logs in Cloud Logging, you can now use log based alerts to create a customisable notification, in near-real time. This lets you monitor important events such as  backup job failures, jobs that did not run, local backup storage saturation, and network failures.
• Configure fine grained alerting – You can write custom event queries on a wide variety of dimensions such as event severity, application type, application name, job type, job name, error message and many more. This gives a lot of flexibility to define alerts for specific events or conditions within a system, thus reducing noise and helping you identify and fix issues easily. 
• Get notified on your preferred notification channel – Google Cloud offers seven pre-built notification channels that let you receive customisable notifications directly over email, SMS, Slack or the Google Cloud mobile app. Alternatively, you can integrate with your own monitoring and event management tools using webhooks or Pub/Sub. 
• Derive useful insights to troubleshoot issues – With Log Analytics, you can use BigQuery to query your data using SQL queries and generate operational insights, which can help you reduce time spent troubleshooting. For example, you can analyze the key reasons that backup and restore jobs fail for a given application or application type. 

The integration also lets you proactively discover deeper issues related to backup and recovery, such as capacity-related issues or certain job failures that happen periodically, by monitoring recurring events in the logs over time. With log-based metrics, you can: 

• Create trend charts to track important metrics such as the number of backup or restore jobs that failed during a day/week/month 
• Receive a notification when the number of occurrences crosses a threshold, for example receive a notification if a snapshot pool saturates more than five times a week 
• Monitor trends in data, such as latency values in logs, and receive a notification if the values change in an unacceptable way.

Getting started

The time to learn that your backup failed should never be when you go to restore. By integrating our Backup and DR service with Cloud Monitoring and Cloud Logging, you can get valuable assurances about the health of your backup and business continuity processes with the same tools that you use to manage other Google Cloud workloads. To get started, check out the Backup and DR event logs page. You can also watch a video that shows you how to set up and use the service and configure some custom alerts.