Well, in the age of Big Data, there is! Big Data happens to be a buzzword that refers to the increasing amount of digital information that is being generated and then stored, as well as the advancing analytics procedure which was created to help make sense of the data. Statistical modeling that is predictive means that working out what will happen within the future by measuring and then understanding as much as possible about what has happened in the past. Models are then created to show what may happen in the future, based on the relationships between the variables which are known to exist from the collected data of the past. This is a key tool in the Big Data toolkit, and insurance has been the one industry has been keen to adopt it.
This article will take a look at some of the recent developments within the insurance industry, which has become available due to the ability to record, store, and then analyze data. An important use of big data is to set policy premiums. When it comes to insurance, efficiency is a vital keyword. Insurers have to set the price of premiums at a level that will ensure that they will receive a profit by covering the risk, but also fits within the budget of their customer, or the customer will go somewhere else.
A great example of this formula is when it comes to motor insurance. While drivers, especially the younger ones will often complain about the high prices, this happens to be a market where there is a lot of competition and shopping around for prices is common for customers. As a result, the insurance company will be made or broken on an ability to accurately assess the risk that is posed by a certain driver and offer them a competitive, but profit making premium.
Most insurers are now offering telemetry based packages, where the actual driving information is sent back to their system to give them a personalized, highly accurate profile of their customers behavior can be built up. Using predictive modeling like mentioned above, the insurer will be able to work out accurate assessments of the likelihood of a driver to be in an accident, or have their car stolen, but comparing the customers behavior with data of thousands of other drivers within their database. This data will sometimes be captured and transmitted from a specially installed box that is fitted in the car or from an app on a driver’s smartphone.
US Insurer, Progressive offers a really great example of when a business has committed to working with their data to enhance their services. They created the Business Innovation Garage, where all of the technologists who are called mechanics create and road test innovations. One of their projects involves rendering 3D images of damaged vehicles using computer graphics. The images are scanned from cameras to create 3D models which allow structured data to be recorded on the damage and condition of a vehicle.
A similar thing to big data analytics is going on in the health world and life insurance right now, such as the growing prevalence of wearable technology such as FitBit activity tracker and the Apple Watch, which will be able to monitor your habits and provide assessments of your lifestyle and activity level. According to Accenture, one-third of insurers are offering services that are based on the use of wearable devices. One of these companies is John Hancock, which will give discounts on premiums and a free FitBIt monitor. Customers will be able to work to reduce their premiums on a sliding scale by showing that they are improving and unhealthy behaviors.
4 Ways that Big Data is transforming the Insurance industry
In order to be able to succeed and be competitive in the insurance industry, insurers need to leverage analytics and Big Data. The insights that are received from Big Data will play a big role in helping insurance companies solve some of their biggest challengers. Being able to capture and analyze any structured data that is associated with their customers and unstructured data from a variety of sources may help insurers evaluate the risks of insuring certain people and set the premium for their policy. Additionally, Big Data and analytics have really affected their customer insights, risk management, and claims management and here are the 4 ways that Big Data is transforming the insurance industry:- Structure of industry: As the insurance industry becomes more competitive, firms have stood out from the crowd by offering the products that cost less than their competitors, as well as operating efficiently and giving great customer service. Big Data offers insurers the chance to transform all of these processes and meet the ever evolving requirements.
- Customer Insights: While customer preferences change, insurers are really under pressure to create simpler products. Companies that analyze Big Data are better are predicting customer behavior so they are able to improve customer retention and become more profitable.
- Managing claims: Insurance companies are able to use predictive analytics in order to address the increasing growth of losses and fraudulent claims. In order to identify those who are more likely to commit fraud, insurers may analyze large amounts of data during the underwriting policy stage.
- Managing Risk: Insurers are able to use Big Data as well as analytics to create policies, especially catastrophe polices which integrate historical data, exposure data, policy conditions and reinsurance data. Underwriters can price a catastrophe police based on the street address, distance from a fire station or other types of factors instead of just using city and state. Insurance companies that use Big Data solutions are able to update their pricing models in real time, and not just several times yearly.
Big data analytics in the insurance industry is the process of examining or inspecting large amount of insurance data or data sets, that contain a variety of insurance data types.