Blog: How insurers can maximise the value of data

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Data is now in vogue for the insurance industry and Mike Smart, business development director at BAE Systems Applied Intelligence, explains why data scientists are going to be much sought out in the future.

Mike Smart
Mike Smart, business development director, BAE Systems Applied Intelligence

The sector deals with large volumes of data –  petabytes, exabytes, zetabytes and yotabytes of the stuff. But what does this mean in the real world? Frankly it’s hard to get your head around but in simple terms just as the industry is getting used to being impressed with gigabytes and terabytes, insurers are going to have to get used to a whole new vocabulary. Gone are the days of 64k of ram and a few megabytes on your PC or laptop.

So where has all this data come from? Vast amounts of data about our activities, preferences and behaviour is captured every day, primarily as a result of the now ubiquitous intelligent phone and our ability not only to create traditional data such as text and numbers but also the storage of voice and image files. The internet of things, with web-enabled devices such as fridge freezers and other utility products, churns out more data every second along with telematics boxes creating millions of data points for a drive down the shops. All add to these ever increasing mountains of data – but what are the implications of all this data circulating in the ether?

Clearly there is the issue of personal information now being created in vast quantities and how secure this data is. As individuals we store some of this data locally, on our phone or personal computing device. However, a very high proportion is shared and stored on shared sites; social media platforms for example or imparted to third parties such as insurers. There is an increasing amount of scope for unscrupulous people to get at this data and use it for their own purposes.

Insurers should take a moment to consider the potential positive aspects of all this data from a commercial perspective. There ought to be the opportunity to build a far better profile of a customer and/or specifically an insurable risk. 

But what to do with it all? Enter the data scientist.

Today’s situation is much like the misquoted ancient mariner “data, data everywhere but not a useful piece of information in sight”. The problem is that there is so much data floating around, insurers are struggling to understand how to make best use of it. This is far from ideal, but data scientists help by building the tools to turn reams of data into something more digestible.

And here we face another conundrum; our data scientists can help interpret information sent back from a speeding rocket but our process models, our transactional systems and rating algorithms were not built with a view to incorporating these voluminous new sources of both structured and unstructured data.

All this data that companies now have access to has tremendous latent commercial value. However, the bridge has yet to be crossed as to how to translate this data into useful information so that products can be better tailored and more appropriately priced. Also using this information to reduce financial crime. That now oft-heard mantra that data is the most valuable commodity on the planet really is coming true.

To maximise the value of all this information companies are going to have to fundamentally change the way we think about designing products and the processes used to sell and administer these new products. The current infrastructures simply will not cope.

The insurance market is not unique in the internal structural systems issues posed by its customer and prospect base creating, at exponential rates, more data. Neither is it alone in that as an industry it really doesn’t fully grasp as yet how best to put this valuable asset to work. One suspects that it won’t only be data scientists who are in great demand in the future; truly lateral thinkers will be worth their weight in gold……or should that be in data?

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