By Cyril Tuohy
For all the talk about the ability of massive amounts of information to transform the competitive landscape, insurance companies remain stubbornly pragmatic in their approach to big data, a pair of industry consultants said.
Many insurance companies struggle to find value in big data and insist that big data “is not for them,” according to a survey of 268 property/casualty and life and health insurers titled Perceptions and Misconception of Big Data in Insurance.
The survey, published by Celent, was co-authored by Craig Beattie and Nicolas Michellod.
Other insurers prefer to invest in particular areas to drill into large data sets to improve pricing models and customer segmentation strategies, or they prefer to use big data infrastructures to enhance risk analysis and mitigate fraud, the report found.
“Most insurance companies are not Ebay and not Yahoo! and are not going to go out and buy Tumblr,” Beattie, said in an interview with InsuranceNewsNet. “Nor are insurers having conversations with customers 30 times a day. We're not saying that they need to be cutting edge, but they do need a foot in the door.”
Big data, a phrase given to data sets that have become so large that they are difficult to analyze using standard measuring tools, have become a common corporate phenomenon as computers process information faster. As data storage becomes less expensive, the amount of information stored by companies is being measured in terabytes, petabytes and even exabytes.
The Internet has helped to create the exponential growth in the amount of data collected on products, services and customers, whether that data is collected from a company on the habits of its customers, or whether customers volunteer the information through surveys, web site clicks and social media.
Beattie said the survey had also uncovered a bit of curious behavior among insurance carriers: Many carriers perceive that their competitors are not investing in big data when, in fact, they are – although in their own ways and at their own pace.
“They seem to think, ‘No one is doing this apart from us’,” Beattie said. “That was the key surprise to us.”
As a result, many companies believe they are ahead of the competition when, in fact, “all insurers should be aware that others are doing the same thing.” Less than 10 percent of the respondents feel their insurance competitors are using big data technologies for competitive advantage, according to Bettie and Michellod.
And therein lies danger. That kind of thinking makes insurers vulnerable not only to other insurers but to other companies, like manufacturers and data aggregators, who are capable of collecting information on their own. In the end, it is the insurance carriers themselves who are at risk of becoming their own worst enemies, he said.
Beattie and Michellod argue that this kind of inertia has positioned the industry for a “step change” in customer engagement as consumers move to burst the industry’s “data bubble.”
“Customers exposed to leaders in digital experiences are already having their expectations around products and service constantly challenged,” Beattie and Michellod wrote.
Already, the warp speed with which consumers can search for medical information should give carriers pause. From conducting genome tests, to researching ancestry trees to tracking weight fluctuations, to measuring caloric intake, to monitoring sleep patterns, consumers have more access to their data than many life and health insurance companies do.
If consumers can capture that data, then other competing insurance companies certainly can, too. “So there’s a lot going on with regard to that kind of big data around e-medicine, and it will play a huge role over the next decade,” Beattie said.
Fewer than 20 percent of the respondents believe data from social networks will be a key differentiator, the survey also found, and insurance companies – on regulatory grounds – remain skittish when it comes to exploiting unstructured or semi-structured data collected from social networks.
But again, a skilled actuary or statistician – of which there are many thousands working in the insurance industry – could have a field day, Beattie noted.
“Forward-thinking companies can take advantage of all that,” Beattie said.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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