The growth of data has changed the way insurers use information. Today, they need to more effectively tap into new data sources to better price their risks and improve customer relationships.
Even though the uptake of Big Data in the insurance industry has been slower than expected, it has certainly captured the attention of many companies that are looking to create competitive advantage in a market that is becoming increasingly fickle. Consumers are no longer brand loyal to an insurer with the wealth of information at their disposal making it easy for them to move between service providers as their needs change.
Fortunately, Big Data has the potential to create more pro-activity in the industry. Being able to leverage a vast amount of data means the insurer can adopt a predictive approach versus the re-active and responsive nature of the past.
Just like customers are arming themselves with better information on the various offerings available in the market, so too are insurers able to create more bespoke solutions tailored to specific user needs. The real-time analysis of Big Data brings with it several business benefits such as more nuanced policies, better estimates in terms of customer analysis, and the like.
Additionally, Big Data makes meeting the ever-changing regulatory and compliance demands of the insurance industry faster and more cost effective.
Algorithms based off Big Data can dynamically monitor and adhere to compliance allowing insurers to reduce their costs and improve their decision-making. It also enables pricing models to be updated in real-time rather than only a few times a year. This brings with it increased accuracy to individual risk pricing ultimately making premiums fairer and more reflective of that risk.
Using data means insurers can therefore more accurately price their risk and assess those risks they are willing to insure. However, this could lead to areas where insurers are unwilling to provide coverage and ultimately leads to the question of who will take responsibility for the uninsurable.
Another issue that bears mentioning is the matter of consent to the sharing of Big Data in the insurance industry. To overcome this, several insurers are offering their customers better base level cover to entice the sharing of their personal data. In this way, consumers can draw direct benefit from providing information to insurers that ultimately leads to the development of better solutions and products across the industry.
However, the opportunities created by Big Data for insurers cannot be ignored.
In today’s environment, individual considerations are becoming less important and a new dynamic is being created in the way that insurers interact with customers. It is no longer good enough to simply dictate to customers the solutions they need to get. Instead, it is understanding customer requirements better through more effective data analysis to offer them something more suited to their requirements.
Kelly Preston is the data analytics manager at SilverBridge.