Big data is creating change in the insurance industry both by leveraging historic insurance data and by using new data sources to create exciting new opportunities.
Big data, as explained in our “jargon buster” blog post, refers to the huge data sets which can now be captured thanks to advances in technology. According to IBM, 90% of the data in the world’s history was created in the past two years, and this volume of data is increasing at an exponential rate. This rapid creation of data can be leveraged to create exciting new opportunities in the insurance industry.
The insurance industry has historically captured large volumes of data both to incept policies and following claims. This data is now being used more effectively, for instance Aviva recently found a link between the purchase of life insurance and safe driving, and used this information to offer cheaper car insurance to their life customers.
Moreover, the insurance industry is using newly available information throughout the insurance cycle. For instance, parametric agricultural insurance uses weather data, crop data and soil data, not only to assist in writing risks, but also to confirm and quantify losses allowing a claim to be paid without the need for an on-site inspection. Satellite imagery was used to quickly confirm claims during hurricanes Harvey, Irma and Maria last year, allowing insurers to focus their resources more effectively. Also, smart sensors are being used to predict and prevent damage to cargo within transit, and to track and quickly recover lost cargo, allowing insurers to prevent a loss before it even occurs and providing insurers with greater certainty when recovering losses.
There are hundreds of examples of the way in which big data is creating new opportunities in the insurance industry and changing the way it operates, from the types of risks that can be written, to how they are written, to how insurers interact with claims.