The insurance industry has always relied on data to determine how to price plans and products. In the past, insurance agencies relied on structured data that was sent to them on a weekly or monthly basis, according to a report from IBM.
Today, insurers have access to data from a wealth of sources. Master's in Data Science explained that social media, smartphone data, telematics, credit reports and a myriad of other sources are available to insurers when they need it.
Big Data is classified as a change in the volume, velocity and variety of data, according to SAS. Data is coming in from many different sources, and much faster. All of this excess data has changed the way insurance companies operate.
According to IBM, Big Data has been able to relate to customers better, identify cost-cutting methods and improve brand identity.
Getting to know you
Social media has allowed insurance agencies to connect with their customers in a different, more informal space. It has allowed issues to be resolved that might not have been addressed before, according to IBM. Social media has also given insurance agencies a new medium to inform customers about products and services offered.
"Social media allows insurers to learn about and meet customer expectations."
Social media gives insurance companies a new channel to their audience. Today's customers expect quicker response from companies when they have a problem. According to Convince and Convert, 42 percent of customers expect a response to their social media customer service question, complaint or comment within an hour.
Big Data has also allowed insurers to learn more about their customers. Social media has given insurers a window into their clients. They are able to see who clients are connected with, giving them the ability to determine which clients could have influence over other clients, IBM explained. This can help them focus on customer retention and figuring out which customers are most worth retaining.
However, Insurance & Technology warned that insurance companies can easily cross the line from informing themselves to get ahead to becoming too knowledgeable of their clients. To remain in customers' good graces, insurers will need to be clear about their privacy policies.
Big Data can also give customers the ability to have more control over their policies. Usage-based auto insurance, for example, allows customers to monitor their driving habits to save money.
When the insurance business began, it used statistics and historical data to determine risks and create product prices. This is still true today, though the information used in deciding prices is more current and more accurate. A 2013 Ordnance Survey report found that about 90 percent of underwriters felt that risk assessment and pricing would be made more accurate by real-time access to claims history.
SmartData Collective explained that Big Data also lets companies see which clients are at risk of cancellation and which are overall happy with the service they receive. This helps them to focus on the customers who are more likely to stick with the company. It can also help companies salvage a relationship with a client who is considering a policy cancellation.
Big Data has given insurance companies the ability to detect fraud more easily as well. This is extremely important to insurance agencies, considering fraudulent claims totaled about $32 billion each year between 2009 and 2013, according to the Insurance Information Institute.
Now, because of social media and telematics, fraud is easier to spot, according to IBM. Seeing if a client is connected on social media to the person they are filing a claim against could be a red flag. Data from the claimant's smartphone or any telematic devices in the car also give the insurer more insight into the validity of the claim.
Keeping up appearances
Insurance agencies need to be trusted allies in the eyes of the client. Without trust between insurer and client, the client is likely to switch companies. Money is lost any time an insurance agency fails at customer service or client retention.
"Insurance agencies need to be trusted allies in the eyes of the client."
Social media has improved insurance agencies' ability to assess how their clients feel about them and their products. Before Big Data, the success of a new product was determined by the number of products sold. Access to customer insights and thoughts now tells companies what their customers thought about the product, IBM explained. Through social media, a client can express his or her opinion about a new purchase and the company can respond right away.
The insurance industry is rapidly changing, largely due to Big Data allowing companies better insight into their products, their customers and themselves. By having greater access to information and analytics, companies are able to take better care of their clients, making sure they get the information and policy they need.
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