How Big Data Is Transforming The Insurance Industry

  • By Emily Johnson
  • 14-11-2019
  • Big Data
big data in insurance industry
Although the Insurance sector has always been pretty conservative, adopting new technologies isn’t just a modern trend but is indispensable to remain competitive. Since insurance organizations need to understand the principles of risk, data becomes an essential factor in assessing risk potential.
To determine profits and offer better service, insurers require accurate estimations. In the past, it took weeks for actuaries to complete the statistical model, but with the advent of big data and its real-time data analysis, it is now possible within minutes.
Today, insurance companies benefit from big data technologies as it enables them to process a tremendous amount of information, enhance workflow, efficiency, and minimize operational costs.
How The Insurance Sector Is Changing, By Sector
The insurance market has already begun to benefit from involving big data. However, each individual segment experiences a different situation. Let’s have a look:
Impact on health & life insurance
With the application of new data sources, health & life insurance companies have been able to develop new insurance schemes that are targeted. Such models encourage customers to have a better lifestyle by providing concessions for higher activity. Recently, John Hancock, which is a life insurance company based in Boston, announced its shift towards interactive policies, which are based on information generated via health apps and fitness trackers.
However, the use of big data technologies in health insurance imposes some concerns regarding data security, ethics, and privacy. This segment still needs legislation to make sure penalizing unhealthy practices doesn’t affect those who require protection.
Impact On P&C insurance
When it comes to property & casualty(P&C) insurance, the situation looks more promising as big data makes it possible to identify the empirical links between consumer behaviour and risks. e.g., car insurance firms can grade roads using accident reports and analyze their customer's tracks. By implementing big data, car insurance companies are able to develop highly personalized customer profiles based on their GPS locational descriptions and then use the data to make decisions. Since GPS information is encrypted, such a procedure won't breach the client's privacy.
Now let’s have a closer look at how big data impacts the insurance sector.
Consumer acquisition
Each individual generates a massive amount of data through social media, appending email addresses, and feedback. This provides more accurate insights about their preferences and requirements than any other survey or questionnaire ever could. Big data enables insurance companies to analyze such unstructured data and helps them create targeted marketing capacities to maximize their efficiency,  and thereby acquire new clients.
Consumer retention
By using customer activity, big data algorithms can detect an early indication of consumer disapproval. This allows you to respond quickly and improve your services and products. Based on collected data, insurers can pay more attention to solving customer's issues, provide discounts, and even modify the pricing scheme to maximize the client's loyalty.
Risk assessment
While assessing the risks, Insurance companies were always focused on analyzing the consumer’s information. With big data technologies, insurers have been able to make this process more efficient. Before making a final decision, the insurance firm can utilize the predictive model to determine possible issues(using consumer’s data) and accurately form their risk class.
Detect and prevent fraud
By using the predictive model, big data technologies allow insurers to compare a client's information against any past fraudulent profiles. It can also detect cases that might need further investigation.
Cost reductions
With the help of big data, insurance companies can automate several manual processes and make it more efficient and minimize costs spent to manage claims and management. In competitive environments, this leads to lower premiums, which, in turn, attracts new customers.
Personalized services & pricing
The verification of unstructured data helps insurance companies to offer personalized services to their clients. Algorithms go through the unorganized data in appending email addresses, telephone calls, and information provided on social media, to develop customized marketing models for each customer. Big data also helps in developing pricing models that generate profits and meet consumer budgets.
Internal process optimization
By incorporating big data algorithms, the insurance sector has been able to improve the efficiency of various processes that require much analysis. It can also help the insurer in checking the policy holder’s past, automate claims operations, and offer more reliable services.
The implementation of big data algorithms is increasing considerably, and according to IT & SNS Telecom, the insurance industry is expected to invest a whopping 3.6 billion USD in these technologies by 2021.
Ultimately, big data can bring a lot of positive changes in the insurance industry.  The continuous verification of customer information makes it possible for insurance companies to understand consumer behavior precisely and collect real-time data. By implementing big data algorithms, insurers can accurately assess risks, offer personalized policies, and prevent fraudulent activities.

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Emily Johnson

Emily Johnson is a marketing consultant with 10+ years of experience in the execution of marketing strategies. She is interested in writing and helps SMBs and large firms with her rich experience. Currently, she heads the marketing department at Blue Mail Media, a renowned B2B data solution company based out of Irving, Texas. Connect with her on Twitter.