Big Data Can Be a Game Changer for Insurance Firms
The insurance industry is always known to be data intensive but in recent times, it is undergoing a data deluge, as insurance firms are generating data from diverse sources such as GPS-enabled devices, social media postings and CCTV footage. A recent PwC poll reveals the vast majority of respondents in insurance companies agree that Big Data analytics can not only unlock the data and turn them into actionable insights, but is becoming the main source of competitive differentiation in the future.
According to the survey, over 90% respondents think Big Data will drive transformation of insurance companies’ business model. Some firms have already deployed Big Data analytics and 44% believe that Big Data is at the heart of informing and shaping strategy; and over half think the biggest impact of big data/analytics will be on customer insight.
“Big Data and analytics are high on the agendas of nearly all insurance companies these days, and our poll confirms that the majority of insurers appreciate just how fundamental big data is to shaping their business and staying ahead of competition,” says Jonathan Howe, UK insurance leader, PwC.
Areas where big data will have the biggest impact responents believe customer insight (55%) and underwriting effectiveness (24%) followed by pricing optimization (15%) according to the report.
Getting ready for the transformation
The researchers believe that in order to be effective in gaining competitive advantage from big data, insurance companies need to be prepared to make changes across their organisation and make this a core part of their operation, as opposed to a one-off exercise. There is a mandate for action and this can’t be left for another day or another budget cycle.
“When this is combined with a clear framework focused on enabling and embedding analytics, insurers can create an insight driven business model that can, in turn, create sustainable and repeatable business advantage,” he Howe.
Earlier this year, Ordnance Survey and the Chartered Insurance Institute worked jointly on a report and survey, ‘The Big Data Rush’ on the insurance sector also reveals that unlike in the past the insurance industry is already well aware of the transformative power of big data – and also of the challenges associated with it. As the report said by harnessing the ‘right data’, insurers can create a much more detailed picture of risk, both on an individual and trend-led basis.
The insurance industry is now undergoing massive transformation owing to constant economic pressure and heated competition, says P. Nanadagopal, MD & CEO, IndiaFirst insurance. Insurance firms are increasing investing in customer and agent experience to enable self-service, cross-selling and multi-channel distribution capabilities. For example, Dr. Nandagopal’s brainchild “MagicBoard”, a solution that allows practical business intelligence for real-time decisions for customer delight, agents support and cost control, has taken IT’s role in the insurance industry to a whole new level.
Insurers that are serious about working with big data will also look to boost their expertise in areas such as telematics, data clustering, an automated grouping of similar data points can provide new insights into apparently familiar situations; sentiment analysis that can help analysze the mood of twitter chatter on a given subject. According to him, it is essential for insurers to optimize their core administration systems and make use of advanced analytics in order to remain competitive.
Lacking right tool and people
Despite the excitement, the insurance industry is facing certain Big Data challenges that are hindering the accelerating growth. Currently, two key challenges are facing the industry as far as Big Data adoption is concerned. Most companies agree that they do not have the specialist skills needed for the job. “They come from academic background in areas such as computer science, modelling and statistics, but beyond this will have business acumen and the ability to spot trends in data from multiple sources,” he said adding that very few companies have what is called a ‘data scientist’.
The other challenge is that smaller players in general lack the necessary tools to drive big data adoption. As Amarnath Ananthanarayanan, MD & CEO, Bharti AXA General Insurance believes that insurance firms are leveraging data analytics and BI to improve certain decision making processes, but do not find value in Big Data. Moreover, he states, maximizing the potential of big data will require the right investment – and in the current economy, insurers are likely to be constrained, as are so many other sectors.
However, analysts believe that despite challenges, Big Data can present a huge opportunity for insurance firms to find new insights with data which in turn can improve their business processes. As the Ordnance Survey report points out “The data rush is on and the first movers to turn Big Data into gold will gain the most competitive advantage.”
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