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September 10 2014 | Denise Garth

In today’s fast-paced, fast-changing digital business landscape, big data is increasingly placed at the forefront in this new digital world due to the explosion of data coming from a wide array of technologies, solutions, and mobile devices. With new sources of data from technologies like social media, telematics, and the Internet of Things taking the industry by storm, data is rapidly becoming the new “currency” for this new digital world. Add to that the vast amounts of proprietary data that have not yet been fully leveraged by insurers, and the result is big data and analytics quickly becoming top priorities for insurers in the race to define and create a competitive and successful future.

Yet, while big data and analytics adoption is increasing, there are fast-emerging organizational and technology challenges that will hold insurers back from seizing the opportunities of big data. More importantly, these challenges may place insurers at risk of being unable to leverage the emerging technologies that are creating massive new data sources that will define a new era of competition and future success. With a significant focus on developing strategies and piloting, there will be an increased demand for resources, both people and technology. SMA’s new research report, Big Data in Insurance: Emerging Trends in Organization and Technology, explores the impact and challenges that big data is effecting in the insurance industry. 

Organizational

The increased need in resources by insurers is a subset of the much larger demand that is impacting all industries and reinforcing the importance of data in the new digital world. Today, insurers are not just competing with each other for resources, or looking for actuarial or financial analyst talent who have historically been the ones to use analytics. Instead, insurers are fiercely competing with companies like Google, Apple, Microsoft, Facebook, Amazon, and many others that represent “cool,” modern, and innovative companies. In addition, traditional companies in every other industry are in the battle for talent – companies such as GE, Proctor & Gamble, and Exxon. In this race for talent, insurers must strategically communicate, highlighting the interesting, challenging, and rapidly emerging opportunities that exist around big data and analytics in the insurance industry. 

Adding to the complex organization and technology demands are the expansion and diversity in business and data priorities. These require knowledge, experience, and expertise about specific business areas as well as specific data sources (internal and external) that may be used within those areas. No longer is the focus only on areas related to risk that were traditionally worked on by actuaries, underwriters, and financial analysts.    

There is a movement away from using aggregate, broad data such as industry bureau, financial institution, or medical/health data. The trend is to move toward using more granular/specific data to assess risk by looking at property details, customer purchasing, historical weather, and social media. Furthermore, it reflects an increased focus on the customer, from acquisition through service, using new sources of data such as social media, geospatial, historical weather, customer purchasing, and mobile devices. Together, these changes reflect the need for resources that have a deep and specific knowledge from other industries and a broader knowledge about the customer demographics, behaviors, and expectations that can be applied to insurance.  

Identifying the business and technology experts inside as well as outside the enterprise is increasingly the critical success factor for big data. In the race for big data talent, insurers must find knowledgeable and skilled staff that have a unique combination of left and right brain skills … business, data, analytic, math, and computer science capabilities combined with the ability to visualize and communicate analysis effectively with all levels of management. Finding the right partners who will not only supplement internal staff, but who will also help to nurture, educate, and train the next generation of resources about the dynamic, exciting, and interesting opportunities within insurance will be critical for the industry’s long-term success. 

Technology

Implementing the technology and organizing the data, while viewed as lesser challenges by insurers, still require focus. The biggest technology challenge for big data is framed in the context of five V’s that define big data. These include the standard three V’s of volume, velocity, and variety, plus two more – veracity and value. Overwhelmingly, insurers indicate that the variety and veracity of the data present the biggest challenges. 

While technology should not be the initial focus in evaluating the potential business opportunities of big data, choosing the right technology platform that takes into consideration the organizational priorities, data sources, and talent is a critical factor for overall success.

As insurers consider their big data strategies and priorities, including the growing use of external device data that produces massive amounts of data every second, they will need to plan for new technology platforms to consume, manage, and analyze this data. Compared to internal or structured external data, the demands, expertise, and costs are substantially different. 

Insurers are on the journey to leverage big data and analytics to gain competitive differentiation and insights to fuel business growth and innovation. As indicated in this research, big data usage has leapt well beyond the experimentation phase, reflected by the remarkable adoption over the last three years, as well as the projected adoption over the next three years. Establishing an organization and culture that provides an overall strategy and roadmap of initiatives, that supports experimentation and the testing of ideas or hypotheses, and that encourages the sharing of learning and results can help create a “culture of the possibilities” that uses big data to fuel change, transformation, and innovation. 

Contact me at dgarth@strategymeetsaction.com if you’d like to learn how SMA can help you on the innovation journey and discover new opportunities for the insurance industry. Click here to learn more about SMA’s research.  

 


For more information, please contact Deb Smallwood at dsmallwood@stratetgymeetsaction.com