Over the past decade, the world has seen an explosion of online and social activity, all of which is generating vast amounts of data. Louis Rossouw surveys the future for insurance.
For life insurance, this development is likely to have implications for accidental mortality and disability rates. Home location data also tells where someone lives; when it is combined with other data sources, we can infer lifestyle information and use it in predictive modelling and in target marketing efforts.
Privacy
Privacy and protection of information is one of the biggest issues when it comes to the use of more and more information. Legislation has been, or is being released, on this issue in many countries. UK’s Data Protection Act is an example of this.
The European Commission has also proposed reforms to the EU data protection rules. Insurers must comply with legislation and, even if they are compliant, be transparent in any use of personal data to avoid loss of reputation.
Tests of the value that consumers attach to the privacy of their information are revealing. For a modest reduction in the price of a movie ticket (less than €1), most people are willing to share their email addresses or mobile phone number for marketing purposes.
Another study found a discount in excess of 20% on vehicle insurance would persuade 74% of consumers to switch to “a new insurance company that will use your driving location information”.
Neither study considered views on sharing personal health data. However, given that Big Data is also about using existing information in more effective ways, it is not necessarily the case that additional legal hurdles need to be crossed. Using existing data to its full extent is also valuable, and should not raise any additional privacy concerns.
Conclusion
Big Data offers a number of opportunities that insurance companies are starting to exploit. These opportunities are present in external or new sources of data as well as applying better use of all the data currently available to insurers.
Data is influential in risk assessment and pricing of risks but also in improving the processes that form the life insurance industry.
Louis Rossouw is a research and analytics actuary at Gen Re
Big data – the big pictureWith the emergence of Big Data and its use, data visualisation has also developed to enable the intuitive understanding of relationships contained within the data. There are many examples of visualisations of data including: Hans Rosling (one of Time magazine’s 100 most influential people for 2012) has become famous for his visualisation of public data sets for such organisations as World Health Organisation and the United Nations. The visualisations are on www.gapminder.org or have a look at some of his presentations on ted.com. Facebook has generated maps showing how people from different cities are connected based on its social graph. |
