From underwriting to customer service—and everything in between—data management can improve every aspect of your operations.
Pure data has been driving the insurance world since day one.
From an actuary’s mathematical, statistical and financial modeling to the black-and-white number crunching of premium-setting, data is king.
And these days, data really is the new currency. After all, the average person generates gigabytes of the stuff daily: every website click, email sent, photo uploaded, text message delivered. And learning how to harness that endless stream of information can be a real competitive advantage for any business — insurance included.
While Big Data can feel overwhelming, with all its large and messy collections of structured (and unstructured) data points growing unchecked every second, the firms that learn how to harness the beast can improve every aspect of their operations — from underwriting to pricing, fraud detection to customer service.
It seems everyone’s catching on, too: Allied Market Research reports the value of Big Data in the insurance industry will grow from $9.6 billion in 2020 to a whopping $25.4 billion by 2032.
A study in The Journal of Finance and Data Science looked at this rise and how it’s being leveraged by the progressive players in the business:
“What's surprising is how fast insurance companies are jumping on the Big Data bandwagon,” Nejla Ellili, first author of the study, told Science X. "They're investing a lot of money in it. … And guess what? It's paying off. Big data helps them save money, offer better insurance deals and catch more fraud.”
Which leads to my next question: What are you waiting for?
Applications of Big Data for insurance
Leaving the comfort of what’s always worked can be scary, but insurance companies today are faced with enormous amounts of data. You need to get your arms around it, dive into it and gain actionable insights from it. The good news is that harnessing Big Data can benefit nearly every part of your operation.
Data-driven underwriting and risk assessment: A game-changer
Data can help you make underwriting truly personal by providing greater insights into the demographics, credit history and claim history of your customers. Plus, it allows you to look at large volumes of information from sources like IoT devices, social media and even public records to identify behavior patterns, as well as historical data for broader customer groups to help you forecast potential risk and create more precise underwriting determinations.
Pricing strategies: From algorithms to premiums
Data can also be extremely helpful with informing pricing strategies. By analyzing incoming data related to everything from health metrics to driving habits, you can adjust premiums accordingly. Whether it’s a device to measure harsh braking or a Fitbit to measure all those morning jogs, these usage-based insurance programs can allow you to more accurately set personalized pricing.
Detecting fraud patterns: Big Data’s role
As fraud gets more sophisticated, the efforts to thwart it must evolve as well. Using data effectively can make a significant difference in anomaly detection, really the first line of fraud defense. By using machine learning, new systems can spot unusual patterns from claims that may indicate evidence of fraud. By comparing that data with external databases, you can more easily identify inconsistencies.
Customer insights: Targeted satisfaction strategies
With so much competition, customer satisfaction is paramount. Using your data for predictive analytics allows you to better anticipate your customer’s needs and provide support proactively. It can also help decrease your response times and make the claims process much smoother.
Unlock the power of Big Data in insurance with trusted partner
Like any tool in your shop, the power from Big Data comes from how you wield it. The first step is often data integration: finding the most effective way to combine data from multiple sources and third-party administrators, to match up those data sources and normalize the data to turn it into something useful.
Now may be the right time to partner with a trusted tech advisor with the business knowledge to wrangle your data in a way that’s actually useful to you. Without that solution, your data can easily get out of hand, which can lead to more errors and diminished trust in what you do have.
But with the right tools, you can begin to leverage Big Data and finally get to predictive views with strategic insights.
“While democratizing analytics and insights is a necessity, a successful analytics strategy hinges on the quality and completeness of the data it’s built upon,” Microsoft wrote in a recent e-book. “In other words, it is essential to combine data across all disparate sources with a single platform in order to leverage a unified, holistic source of truth.”
After all, Big Data is never just about quantity. Instead, it’s about extracting the value that leads to smarter decision-making. It’s about making those numbers – the ones the insurance industry relies on so much – truly work for you in ways they never have before.
To learn how to unlock the power of your data to improve operations, efficiencies and customer service, reach out to MarksNelson tech advisor Melinda White today.
