Data. Those of us in the insurance industry have always collected data, had access to it, and analyzed it to the best of our abilities. But the amount we are collecting, where it’s coming from, and the way that we collect and manage it, has catapulted us into a whole new stratosphere over recent years. In this new world of harvesting data from an ever-growing number of categories of data and the types of devices generating it, we must focus on the trends that are transforming our industry, and come up with a formula to analyze and make the data actionable for our business.
A new world of data
To achieve simplicity and clarity of vision, there are several steps insurers need to complete to build a holistic tool for data preparation, querying and visualization. The first step is identifying the trends that are transforming the industry. These transformational trends all fall under the Internet of Things (IoT)and are grouped into into three main categories:
- Wearable technology
- Connected homes and cars
The Internet of Things (IoT) and machine-to-machine communications are the neural pathways in a new digital world of many new data harvesting techniques, such as machine learning, speech-to-speech translation and hybrid cloud computing. The Gartner Internet of Things Primer for 2016 predicts that in 2020, more than 20 billion connected things will be in use across a range of industries and the IoT will touch every role across an enterprise.
Ultimately, the primary value of IoT for the insurance industry will lie in the management, use and analysis of the data it generates.
Wearables, or the smart watches, activity trackers, wellness and medical devices, smart rings for payments and fitness bands, refer not just to garments but to any device worn on the body for business or personal solutions. In the arena of health and life insurance, new apps for wearable technology and smartphones are launching at a fast pace around the globe.
While carriers will continue to develop strategies to use the wide variety of data collected from wearables, the information to evaluate risk may not be available for years, but we must start testing it sooner rather than later. Such strategy will also require a process on how to analyze it so that the data is actionable. And because much of the data is protected information, emerging compliance and regulatory changes around its use should be expected.
Additionally, connected homes and car technology presents new data points for insurers to process. With connected homes, some examples of data generated include “smart” intruder alarms and notifications, fire and water detectors that trigger emergency services, thermostats, lighting, smoke and carbon monoxide detectors, and house hold ovens.
Cars will become more connected digitally to home computer systems, other cars and to OEMs and data service providers who will gather vast amounts of information from drivers through these networks.
Another enormous source for data is telematics, which began in the 1990s and is in the launch stages in most developing countries today. Deployed in usage-based insurance (UBI), this technology today enables new insurance models based on actual driver behavior, speed, cornering, braking, and so on. The main data points being generated by telematics are distance, time, behavior and context of driver behavior, roadway topography, accelerometer data, context from previous claims history, route optimization, fuel usage, tire pressure, repair or emissions alerts / diagnostic codes for vehicles.
Various forecasts predict that installed telematics used in motor insurance policies will rise quickly over the next few years.
The rise of the connected car and telematics means that significant disruptive forces are likely to grow. Indicators like accelerometer data on impact related to personal injury claims and automated alerts to emergency services in the event of an incident could revolutionize the claims management market forever.
Connecting the connections
Big data and using insights from analytics no longer reside only in narrow objectives set by a carrier’s CIO or data scientists. Insurers must be ready to leverage every bit of data and every new advancement across the continuum in a way that will help them maintain a competitive advantage.
In a future post, I will discuss the steps that insurance carriers need to take to harness all of these growing data sources. In the meantime, for more about implementing and using advanced analytics, download the LexisNexis Insurance Advanced Analytics white paper.