No term has captured the zeitgeist of the technological revolution in the business world like, “big data”. This all-encompassing term came to define the way that thousands of businesses looked at their customers differently.
As big data is all about facts, figures, and unparalleled insight – it’s no surprise that the insurance industry was one of the first industries to latch on to big data in a major way. The use of financial data, actuarial data, claims data and risk data cover virtually every important decision an insurance company makes.
In fact, the Ernst and Young 2015 Global Insurance Outlook claimed that if one word would summarise the insurance industry right now, it would be “technology.”
So, in surveying the very broad landscape of the insurance industry and the ever expanding world of big data, how exactly are various insurance companies using big data to transform their businesses?
As it stands now, the car insurance industry is one of the most competitive branches of the overall insurance landscape. The amount of advertising money spent by companies such as: LVE, Admiral, and the RAC make it easy for customers to find a solution, but hard to find the right one.
Car insurance companies are now using big data to analyse customers’ driving habits, the potential for an accident, and even the likelihood of having their car stolen. This is achieved using predictive modelling and comparing the behaviour data of a customer against that of thousands of others in a database.
This is all done through ‘telematics’, which essentially involves adding some kind of device to a car to see how the driver drives. Confused.com have a great explainer here.
Big data is all about using advanced analytics to more accurately address your customers’ needs. With the supremely competitive world of car insurance never slowing down, it’s important for companies to use big data to zoom past the competition.
Using similar big data strategies to the car insurance industry, property insurance is using advanced data methods to survey a customer’s potential risk. You may have heard about the smart home revolution that has dominated the home technology industry. From being able to control your thermostat to doing a load of laundry all from your phone, smart homes give users an incredible amount of personal control.
The surge in smarter homes and the intuitive home technology behind it has allowed home insurance companies to extract data they never would have had access to before. Data sources such as motion sensors that track occupancy to utility and appliance usage records provide more insight than ever.
The combination of these new ways of extracting data with the tried and true method of analysing local crime and traffic reports enables property insurance companies to offer a comprehensive assessment of a customer’s property claim risk.
Health and Life Insurance
If the smart home revolution is all about sophisticated monitoring solutions, the same can be doubly said for how people are thinking about their health and lifestyle choices. Products such as the Fitbit, Garmin, and the Apple Watch have not only enabled users to get transparency on their activity, but also health and life insurers.
Using big data, health and life insurers are now able to analyse the intricate nature of their customers’ health and lifestyle choices. For example, in the US John Hancock offered up cheaper premiums if you let them track your Fitbit data. In the UK, Vitality offer up points for discounts if you let them track your activity too.
It must be stated that more so than other insurance industries, big data as used by the health and life insurance sector brings up the question of privacy. Much of this information can obviously be delicate. However, if insurance companies can continue to offer potential discounts in exchange for sensitive data they will have increasing responsibilities around data security.