Insurers widely recognize big data as the future of the industry, enhancing the way they acquire information through variant sources as opposed to just traditional databases.
But in a survey of 116 chief information officers and IT executives, Novarica found a lack of overall knowledge about big data has both life and P&C insurers confused about how to properly leverage it.
“Big data is new and the industry isn’t sure how to derive business benefits from it yet,” said Matthew Josefowicz, CEO and president of Novarica. “Companies who have launched big data tools, however, are seeing benefits. They are able to model risk and customer behavior more effectively, leading to better analytics.”
The study, “Hot Topics for Insurers 2016”, was conducted over the final two months of last year and measured the insurance industry’s current deployment in big data tools as well as digital, mobile, analytics, social media and cloud services.
Only 15 percent of CIOs surveyed said their companies are currently investing in big data. Meanwhile, results for cloud, digital, mobile, analytics and social media were all north of 30 percent.
“Only a small portion of insurers deal with big data directly because many of them still have agent-based distribution,” said Josefowicz. “Insurance is about analyzing data to make decisions and big data tools are the next evolution of that. It makes companies better at what they do.”
While big data is lagging behind in terms of deployment, it is the only category to have doubled since Novarica’s initial study in 2014. To be sure, there were 95 participants in that survey compared to this year. Today, big data is predominantly used as a marketing tool to study patterns in online behavior. But it also serves as a way for insurers to deal with high volumes of internal data, Josefowicz says.
“Insurers are sitting on mountains of information that needs to be made sense of,” he said. “Those who haven’t embraced big data are likely to in the near future.”
Though it is primarily larger companies investing in big data at this point, mid-size companies are finding they can afford to be more aggressive with it due to much lower switching costs. Technology in place at a mid-size insurance company is usually simpler than that of its more affluent competitors.