A Look at Insurance's Big Data Trajectory

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Mitch Wein, VP of research and consulting at Novarica, gave a speech at INN’s Insurance Analytics Summit, which was held in late October, on what insurers are doing with big data and analytics. After his talk, he sat down with editorial director John McCormick to discuss where carriers are with the technology and where he see them going in the near-future. What follows is an edited version of the conversation.

INN: When you look at big data and analytics, what are some of the neat applications you see?

WEIN: One of the interesting applications with big data is the notion of pre-underwriting potential customers before they actually come to the carrier or the agent looking for the coverage. This way the pricing is already there, or approximate pricing is already there, and the submission response can be extremely quick. The other thing we’re seeing with big data is insurers going through their risk pools and determining with predictive analytics where potential damages can take place and where claims could occur, and then segmenting the marketplace and getting in front of those claims.

INN: But insurers are just still scratching the surface with big data, correct?

WEIN: Yes. And the reason for that is that big data tools have been primarily used to optimize existing books of businesses. Carriers are primarily using data that lives within the organization.

In some cases, more mature organizations are doing data enrichment to get additional data from third parties to augment what they have. However, what they are not doing today is mining the voluminous amounts of data in places like social media where it could give them additional insights on possible products, life events and other things where a certain agent interaction or direct interaction could be targeted.

INN: And why is that? People have been talking about the richness of social media data for some time.

WEIN: It’s a combination of priority and generational cohort. In terms of priority, people are just really getting a hold on big data tools like Hadoop and R and other things to look at their internal data. As I said, not many of them are even enriching the data they have internally with these tools and there is a considerable amount of data to go through. Social media data is kind of viewed as a nice to have right now, not a necessity. Now, in terms of the generational cohort, I would suggest to you that things will change considerably over the next 10 years as millennials take over senior management. They are much more likely to communicate over social media on everything that’s happening with them. They are also much more likely to align financial protections and products based upon where people are in terms of their life events and their transitions.

INN: What would you say are the biggest challenges insurers face when it comes to big data and analytics?

WEIN: I think one of the biggest challenges around data projects, in general, is data governance, which, in my experience, represents 40 percent or more of the challenges of actually executing a project. This really boils down to who is going to make a decision about the data, who is going to own the data and who is ultimately going to arbitrate how the data can be used and where it can be used.

INN: How do you overcome that particular challenge?

WEIN: Ideally you get in front of it by establishing two things. First is a data governance committee, traditionally an executive-level committee for top decisions as well as a second-level committee made up mostly of operational mid-level managers who direct reports and findings to the executives. So that’s one way you get to it.

The other way is developing a data strategy and roadmap that clearly points out the current-state situation, the pain points and the strategic objectives -- as well as defining an enterprise strategic blueprint for data and a roadmap to get from the current spot to where the organization wants to go.

Having that explicit roadmap and strategy defined and agreed to, politically, will help align projects and funding.

INN: Where do you think we’ll be in terms of big data and analytics in two to five years?

WEIN: Well, I think what we are going to find out is that most insurers are going to realize they don’t have the expertise to handle data, particularly when we start talking about hundreds of billions or trillions of elements of data. And as each device becomes enabled from an Internet-of-Things perspective, there’s just going to be more and more data created.

So what I suggest we’re going to see, ultimately, is insurers turning to third parties who really look at that data, score the data, trend the data, and then send it back to the carriers for further workflow.

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