Nothing’s hotter in insurance right now than big data. That’s something Insurance Networking News made perfectly clear last month in their series on the topic.
“If there were a competition for breathless hype in technology, big data would be the current champion,” INN said. ”And though the phrase is ubiquitous in boardrooms and IT departments across categories of companies, the insurance industry is in many ways taking the lead in getting real business value from the volume, velocity, and variety of massive datasets.”
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Why is it so popular? Seven reasons come to mind.
1. New (or improved) functionalities. Progressive has pioneered two functionalities that are relatively new to the insurance industry: telematics and web-based quoting and sales, all of which “lean heavily on big data technology.” For other insurers, big data has also proved its worth in existing functions like customer communication, web design and direct mail.
2. Deeper insights. “A lot of what we talk about is having our data more integrated so it can be shared across departments,” said Floyd Yager, chief data officer at Allstate. “Something meant for a single purpose often leads to other insights.” In his experience, big data positions insurers to understand who their customers are and how better to serve them.
3. Reduced costs. Claims and fraud management, cyber risk, customer management, pricing, risk assessment and selection, distribution and service management, product innovation, and research and development – these are all areas where Swiss Re has leveraged big data “to help reduce costs and improve the efficiency of current processes throughout the insurance value chain.”
4. Streamlined reporting. Reporting and analytics aren’t new to the industry – far from it – but the ease of use that big data adds to this area certainly is. According to INN, subject matter experts said that big data can equip insurers to “circumvent exhaustive data cleanup efforts that previously have stymied reporting and analytics efforts.”
5. Internal efficiencies. CNA is using big data on the company side to improve workers’ compensation claims and adjusters’ notes. “That is a classic, unstructured big data kind of problem,” said Nate Root, SVP of CNA’s shared service organization. “We have hundreds of thousands of workers’ compensation claims, and claims adjuster notes, and there is tremendous value in those notes.”
6. Innovation. Riccardo Baron, big data and smart analytics lead for Americas at Swiss Re, said that the significance of big data “has to do with innovation, and how we believe newcomers in the insurance industry could potentially disrupt traditional business models.” In other words, it’s one of the forces charting the future of the industry.
7. Heightened customer value. Life insurance is a segment where attracting new customers has been a real challenge, due to an “onerous underwriting process” that can involve “inches and inches of paperwork” simply to produce a risk classification. When John Hancock introduced telematics through wearable technologies, they gained a “wealth of data” that not only facilitated underwriting, but empowered customers “to improve their rate as they improve themselves,” exchanging data for real value.
Insurance telematics is one area where the benefits of big data are pulled crisply into focus. All of the benefits above – new functionalities, deeper insights, reduced costs, streamlined reporting and efficiencies, disruptive value and customer rewards – come into play, whether you’re talking wearable devices from a life insurance company, or a UBI smartphone app that encourages safer driving habits.