Big data and analytics have been described as the next oil, but the majority of insurers are still at the preliminary stages of its development and what to do with all this data once it is obtained. Big data proved a very fitting and timely topic for a Reactions webcast in August in association with Tata Consultancy Services (TCS).
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Download a PDF of the presentation from Reactions Big Data and Analytics in Insurance webcast, which took place on August 9 in association with Tata Consultancy Services, here!
The webcast included presentations by Matthew Josefowicz, partner and managing director of Novarica, and Frank Diana, leader for digital and analytic efforts at TCS Global Consulting.
Diana described big data in terms of three Vs – with volume, variety and velocity all coming into play. The ‘V’ that he regards with highest importance when examining big data, however, is value. This is in regards to having to plan and know where it is going to add value to your business before perusing big data.
“It is taking traditional methods, assigning a new method or approach that is big data in nature and improving the process,” said Diana.
The continuing theme throughout the webcast was that firms have to establish the business outcomes they want to achieve before applying big data strategies. Diana said that most unsuccessful applications of big data and analytics have not considered the end result before the application.
Diana broke the process down into four steps: retrieving your data in the first place; dissecting the value from it and focusing on a specific area; establishing the outcome desired from that data, which further helps firms zone into specific area; and, lastly, determining what business metrics firms would use to achieve this.
Josefowicz added: “It really comes down to formulating the business strategy to take advantage of it. The company needs to think about this at a strategic level, to look at where they would enhance their claims processes. They need to decide how they can use analytics to better drive their business forward and then once those values are articulated that creates a need for technological investment.”
The business world and indeed insurance is putting more value on engagement and the experience of the consumer than that of the actual transaction.
“A focus away from systems and records and more towards systems of engagement, basically that is taking consumer technology and better enabling the interactions that happen between employee and customer, employee and partner employee and stake holder within an ecosystem,” said Diana.
The critical role he sees that big data will play in this movement is to better inform operations and drive more intelligence into these processes by increasing the information available to make better decisions. This information is already starting to be established but the mechanism to retrieve the parts desired is still very much a manual process. This avoids a lot of errors but is a very slow process.
In a Novarica study of 86 insurers on the subject of big data, it found big data to be in the very early stages of development but more than a quarter of insurers are planning on using click streams, audio data, mobile geospatial data and other external data. Social media was found to be big data’s biggest export but it is residing mainly in company marketing departments at the moment.
“Social media is currently relegated to the marketing organisations but companies are starting to keep an eye on the possibilities of learning about their policy holders and their current risks,” said Josefowicz.
The study also found that big data is not a high priority for the majority of insurers. It said few insurers have the capabilities to capture and manage big data in-house, but a minority of 15% to 30% are planning to do so. This new focus on big data has brought to light the need for insurers to focus on the analytics they already have before moving forward.
“The general hype around big data is refocusing insurers on analytics. All of the focus on big data is reminding insurers that they need to get their little data house in order,” said Josefowicz.
Big data is set to make big changes in the industry but both Josefowicz and Diana see a common misguided approach of thinking. “Big data is just part of a broader information management programme and should be viewed as such and in the context of what you are trying to achieve from a business perspective,” said Diana.
The benefits of the big data hype are already being witnessed with a clean-up of insurer’s analytic capabilities, which will speed up processes in the mid-term. Big data is, however, furthering the gap between the larger insurers and the smaller with the larger being able to invest heavily and specify where the smaller insurer previously reined. Diana and Josefowicz see this as further emphasising the need for smaller insurers to concentrate on business strategy to get their financial investments successful as there is less room for errors.
“There are some incredibly transformative things coming in terms of the effect on the industry but the first thing is insurers are looking at their internal analytic capability and saying how can I improve this, how can I get ready for a flood of additional data, how can I make sure I have ability to act on this…how can I be prepared,” said Josefowicz.
To view a replay of the Big Data and Analytics in Insurance webcast visit Reactions’ webcast channel in the Event/Webcasts section by clicking here.