Big data and the resulting insights are poised to fundamentally alter every part of the insurance value chain.
By Brian Wallace, CTO, Global Insurance, CSC
We all know the insurance industry has decades of experience capturing data in transactional systems of record, and analyzing that big data to understand and price risk. This is a core competency of any insurance company. Traditional business intelligence, data warehousing, and visualization technologies are also used extensively for operational reporting and compliance management. So how then, in the shift from data capture to data analytics, will things be different? The answer lies in three areas:
- The growing range of new data types and sources
- A new breed of analytics platforms and tools
- The expanded use of data analytics across the entire value chain
In terms of big data itself, the industry has long relied on a narrow set of data sources: the new business application, third party providers (e.g., MIB, Equifax), and the insurer’s own claims and loss history. Today, carriers are looking to augment the data they currently possess by drawing upon an increasingly diverse array of data they can acquire, and more recently data that they earn. New sources of external big data include: social and rich media, geospatial, telematics, and weather, all made accessible through the use of smartphones, IoT sensors, satellites, and even drones. Government sponsored “open data” initiatives are granting insurers access to broad-based public health, education, transportation, energy and worker safety data. And finally, smart vehicle and smart home telematics devices, along with biometric wearables, offer insurers unprecedented access to real-time behavior data, willingly shared by policy holders in exchange for discounts or services.
Fortunately for insurers, the creative economy has developed and matured new platforms and technologies needed to capture, persist, and analyze all this new big data at scale. The batch file system that Google deploys across over 2 million servers to process 11 billion queries per day (Hadoop), the databases that Facebook uses to store 300 petabytes of data and process 30,000 ad hoc queries daily (NoSQL), and the same data ingestion technology that Twitter uses to access 600 million real-time data sources via billions of transaction per second (Kafka, Stream) are all easily and economically deployable for insurers on either a public or private cloud basis.
The key, then, lies in leveraging these new data sources and analytics technologies to generate relevant business value. The good news is that integrating external sources of data and analyzing that data in sophisticated ways is something insurers know how to do well. Listed above is a representative sampling of how insurance companies are exploiting insight and understanding across the value chain.
So while it’s fair to say that insurers understand the art of the possible, and are making the shift from data capture to data analytics, it remains early days in terms of realized business value. There are still a number of key challenges including: insufficient quality and quantity of historical data, consumer concerns over data privacy, availability of data science expertise, and the always-difficult organizational change aspects of introducing new methods and processes.
That said, insurers understand that data has already become the next competitive weapon, and that their ability to harness and leverage data will be a gating factor in determining the next wave of winners and losers. Challenges aside, virtually every insurance company is investing strategically to make the shift.
A comprehensive look at how digital can power forward the enterprise: csc.com/power-forward
Read more in this paper, Key Shifts Mark the Path to Digital Insurance.
This paper is part of the Journey to the Digital Enterprise paper series.
As the CTO for CSC’s Global Insurance business, Brian Wallace drives technology strategy, client-focused solution development and the ongoing alignment of CSC’s capabilities to the needs of the insurance industry. He engages with clients, prospects and partners around digital disruption and the future of the insurance industry. Follow him on Twitter.