Why Is an Insurance Company Giving a University Millions for Computer Science?

MassMutual is giving big to data science and cybersecurity at UMass. It's part of its efforts to strengthen the region’s workforce and get a leg up in the data-driven future of insurance.

We’ve seen a ton of gifts for data science to universities in recent years, driven by alumni looking to build up a hot area of study at their alma maters, regional funders looking to improve local standing in a growing field, or funders hoping to leverage data to serve their varying priorities.

The MassMutual Foundation's $15 million commitment to education and research in computer and data science has some of those elements, but it’s a little different. The donation is being presented as a public-private partnership that will benefit the school, the community, and the company behind the gift. The move coincides with an earlier regional data science grant from MassMutual, and its recent establishment of a satellite data science team in Amherst, intended to collaborate with the nearby university.

So this grant is similar to those of other higher ed donations from local corporations looking to set up a pipeline of skilled labor while building the university’s expertise in a field relevant to the industry. We’ve seen it in everything from oil and gas extraction to brewing beer.

That’s not to say such grants are entirely self-serving. There’s a symbiosis involved, as the universities gain resources in a strategic area of education and research, and a greater ability to offer grads high-paying work right out of college.

In the case of the MassMutual Foundation gift, the funding will go toward two programs:

The Center for Data Science at UMass Amherst will receive $12 million to double the number of data science courses and triple its master’s program in computer science.
The university’s Cybersecurity Institute will receive $3 million for research and education, including a new certification program and hiring of new faculty.

Combined, the Springfield-based company hopes to help the region become a big player in these two high-tech fields, creating more graduates entering the workforce in fast-growing areas. Overall, the MassMutual Foundation is planning to give $100 million in charitable investments over the next five years, with focuses on economic development, financial education, and workforce development, and the UMass gift will be a signature program.

So why does a life insurance company care so much about big data? Because the ability to mine significance from large data sets is central to the future of the insurance industry.

The core of insurance involves the assessment of risk, by which actuaries use statistics and fancy math to predict how much covering a market will cost them in payouts, what they should be charging in premiums, and finding the sweet spot between the two.

According to a 2014 analysis by consultant McKinsey & Company, “revolutionary advances in computing technology and the explosion of new digital data sources have expanded and reinvented the core disciplines of insurers.”

As our collective behavior feeds into large data sets, deep analysis can help insurers better predict the frequency and severity of unforeseen dangers they insure against—sometimes in unsettling ways.

One such example that consumer groups came out against was the use of credit scores in car insurance underwriting, relying on data that showed people with better credit tend to be safer drivers. Insurance companies are beginning to use realtime monitoring of driving behavior data to calculate risk and adjust rates, while giving feedback to reduce risky behaviors. Data analysis is also important to deciding whether to move into a new market or provide new insurance products.

In the case of MassMutual, which deals primarily in life insurance, the company is analyzing mortality statistics related to its core products, and building new predictive models to estimate a potential policy holder’s risk instantaneously based on large data sets.

There's tremendous hidden value for companies, such that MassMutual has built up its data team to 50 members. It's even created a development program in which recent college grads can enter a three-year training program to become data scientists for the company. The company is becoming increasingly invested in improving data science expertise and workforce in its backyard, and you can see why.