Insurers are finding big data brings the most significant business value in actuarial/product modeling, followed by underwriting and claims, according to “Analytics and Big Data at Insurers 2013,” a new report from Novarica, which also found the number of insurers invested in capturing, analyzing and gaining insight from big data is still relatively small.
“When it comes to big data, insurers are engaging in a limited manner, most commonly leveraging consumer, business and geospatial data for benefits in underwriting, actuarial and product development,” wrote Martina Conlon, author of the report and principal at Novarica.
In terms of actuarial/product modeling, 18 percent of insurers said they derived significant value from big data; 13 percent reported “some business value,” while another 24 percent of respondents reported plans to employ big data/analytics in actuarial/product modeling in the next 12 months Four percent said the value was unclear.
Thirteen percent of insurers reported significant value from big data/analytics investments in underwriting, 9 percent in claims, 7 percent in marketing and 2 percent in service.
Despite the fact that a handful of insurers reported that the business value of their big data initiatives were unclear — most noticeably in claims (11 percent) — the percentage of insurers with big data initiatives was right around 35 percent in all areas except service, which fell below 30 percent.
Along with actuarial/product modeling, marketing is another area where a lot of insurers are planning big data use in the next 12 months (24 percent), followed by underwriting (18 percent), and then claims and service (both at 15 percent).
Large insurers are more likely to currently employ big data practices, Novarica found, but insurers of all sizes currently are planning to expand big data practices in the next 12 months.
The report also outlines analytics usage and plans among property/casualty insurers and found they are further ahead when it comes to analytics and predictive modeling usage.
Particularly when it comes to pricing and actuarial modeling and risk analytics, insurers are heavily invested; 89 percent of respondents employ analytics in each of these areas. Forty percent reported significant value from analytics investments pricing, and 49 percent reported the same for actuarial modeling and risk analytics.
The most popular data sources are third-party consumer or business data sources, followed by geospatial data. Half as many are using sources such as internet clickstreams and mobile data. However, the report notes that while few companies currently use social media in their analytics, close to half currently are using analytics for marketing or plan to do so.
When speaking of strictly predictive modeling, the report says nearly all insurers employ them for profitability models and financial projections. Meanwhile, predictive models around claims are “surprisingly under-utilized, have demonstrated limited benefit for many respondents, and are not planned for use by many carriers,” according to the report.
The most common reasons insurers cited for lagging investments in predictive models was that resources are being deployed elsewhere, such as a core systems replacement project or new product and distribution channels.
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