While the industry has made progress capturing and analyzing the majority of structured data associated with their policyholders, the volume of untapped unstructured data remains just as valuable. Unstructured data refers to information sharing sources such as real time news feeds, social media and other mobile channels.
To create a competitive advantage and succeed in that dynamic environment, insurers must leverage the value of big data. As underwriting continues to drive insurance pricing, big data and analytics have also had profound effects on customer insights, claims management and risk management.
Insurance Industry StructureAt its core, the insurance industry encompasses the management of an individual’s risk. Between life, health and liability insurance, companies collect premiums on policies and invest them in holdings until a claims is requested. If the maximum amount paid out is greater than premiums collected, the initial policy underestimated the individual’s level of risk.
A number of factors are constantly being calculated to ensure appropriate policies are being issued. An actuary helps design insurance policies using past information to analyze the financial consequences and risks. Likewise, an underwriter will utilize actuary data along with financial data and claims reports to decide the appropriate level of coverage and the terms of coverage. If the price is too low then profit margins may be inadequate, and if prices are very high then customers won’t buy policies from the company.
As the insurance industry trends toward highly competitive, companies must differentiate themselves through low cost structures, greater efficiency and customer satisfaction. In a technology driven economy, big data inspires new ways to transform these processes while also meeting evolving regulatory compliance.