Data & Analytics in Insurance by Manjit Rana, Advisor to The Data Company
Gartner state that while data and analytics is the foundation of the insurance industry, analytics maturity remains low. Insurers still lack the investment in emerging technologies, data sources and business units to enable the intelligent enterprise. Do you agree and specifically is this the case in the Claims area?
Most tier 1 and 2 insurers are already fairly sophisticated in the way in which they use their data, however there needs to be some improvement. The insurance industry has previously not had the same opportunities to collate data as easily as other industries such as car manufacturers. For example, with the help of new technologies it can be tracked how often a car is being used, type of driving and which location a car is being driven to which creates a clear pattern for the manufacturer.
Insurance companies think traditionally about the way in which the industry works. They sell consumers a protection product hoping that there is little communication, as when the customer does communicate it usually means that they are making a claim which incurs costs for the insurance company. However this type of interaction for typically 90% of customers happens just once a year, therefore restricting the opportunity for insurance companies to be able to gather data.
In order to increase the chances of collecting more data, insurers have to fundamentally change the way in which they think about their products. Rather than thinking of their product as a protection service, they should see it as more of a prevention product. This would encourage far more frequent interaction which provides legitimacy to gathering more data to be able to analyse it in order to provide a prevention type service. This increases sophistication and opportunity to justifiably gather data to provide value to the policy holder. The main issue when trying to gather big data is that it is imperative to bring real value and benefits for consumers to be willing to share more of their data.
The largest expenditure for most insurance companies is claims, which is why it gets the most attention. However there are limited actions when it comes to claims such as, either finding a cheaper way to fulfil the claim or looking to prevent customers from defrauding insurance companies. Therefore it is important to gather data before a claim occurs because at that point the consumer is least motivated to defraud the company. If a central database was updated every time a phone was lost or stolen and it was visible that multiple insurance companies have looked into this, it creates an opportunity for the insurance industry to become more sophisticated, however there is a big issue of what data can be shared and if there is permission to share it.
Therefore in terms of data, it is about what you can gather from consumers, what you can gather from the situation you are in and what can you get using external sources.
If you are interested in more data solutions in the Insurance Industry, contact us now to see how we can help.