Extracting massive volumes of relevant customer data will be integral in transforming the insurance industry
A cloud-based infrastructure is now the norm for most insurance companies. In 2019, seven in 10 carriers incorporated the cloud in their business operations, with increased speed, flexibility, and scalability being some of the key benefits. And this widespread cloud adoption has meant one thing – a massive volume of data.
When harnessed correctly, this data can lead to profound insights within the insurance industry, helping providers become more efficient and deliver a better customer experience. With that said, here’s the role big data plays in the insurance industry, and how to capitalize on it.
Why it’s being used in the insurance industry?
Big data has three main uses. First, it offers in-depth insights into customer needs. Analyzing data offers a deeper understanding of customer behavior, what they’re looking for with insurance policies, potential issues that may cause friction, which channels are most effective for reaching them, and so on.
In turn, insurance companies can adjust their premiums, improve customer service, and create targeted offers customers are likely to respond to. The end result is increased customer satisfaction, loyalty, and retention.
Next, big data serves as a catalyst for business model innovation. It helps insurance companies optimize everything from underwriting and claims processing to fraud detection and investigation. This maximizes efficiency and allows providers to get more done with less wasted motion.
Third, it enables companies to monitor financial performance. Whether it’s tweaking pricing or tracking claims adjustment expenses, big data can be leveraged to improve decision-making and increase profit margins.
How is it being used in the insurance industry?
Risk management is a major concern for insurance companies. There are many emerging threats they must contend with and overcome in order to remain competitive and thrive long-term. Big data can be a tremendous asset for managing risk, as it can be used to ensure compliance with data storage and privacy regulations, and monitor brand reputation.
For instance, an insurance agency might use big data to ensure their practices align with the General Data Protection Regulation (GDPR) and promptly address any bad publicity on social media before it gets out of hand.
Beyond that, insurance companies can use it to perform background checks on candidates by quickly gathering data from different resources like legal databases, financial registers, and sanctions lists.
Rather than going through the arduous and time-consuming process of sifting through a mountain of resources manually, big data can produce in-depth reports within minutes.
Also note that newer technologies like web data integration tools are capable of extracting and normalizing huge volumes of data and producing highly-digestible, easy-to-read reports and visualizations. This means insurance companies spend less time preparing the data and more time putting it to use.
The use cases
To further illustrate the practical application of big data in the insurance industry, here are a few examples of how companies can capitalize on it. One is to conveniently and efficiently collect information on a person to determine a premium.
For instance, an auto insurance company might examine a person’s previous driving record and the driving safety level in their area to calculate the chances of them being involved in an accident.
Insurance companies can also use big data in fraud detection. Fraudulent claims are an ongoing problem and total at least US$80 billion per year.
With big data, insurance companies can find out how many past claims a customer has made and the chances of those claims being fraudulent. If a person has a history of false claims, an agent will be automatically notified so they can investigate the customer further.
In turn, this streamlines the process significantly, ensuring agents only spend time assessing valid threats.
Where is all of this heading?
The volume of global data being generated has increased dramatically, from 8 zettabyte in 2015 to a predicted 40 zettabyte in 2020.
This surge has created immense opportunities for insurance companies. Taking a data-driven approach allows them to create better value for customers, increase productivity, optimize their marketing strategies, and gain a competitive advantage.
Author: Luke Fitzpatrick
Content retrieved from: https://e27.co/what-role-does-big-data-play-in-the-insurance-industry-20190621/.