While big data is becoming increasingly important to insurers, it is not yet a major priority with most carriers, Novarica concluded in a new technology report.
“Insurers have gotten somewhat more conservative in their projected adoption plans for big data in the last two years,” Novarica found. “Most carriers are still maturing and expanding their use of traditional data analytics and predictive models to improve processes, reduce losses, and generally improve their book of business.”
Use of big data has stayed the same across the board as compared to two years ago, but Novarica noted that levels are fairly low for all types of big data with the exception of third-party consumer or business data, geospatial data and weather data.
That leaves other options such as Internet click streams, social media content and mobile/telematics data at small usage levels, Novarica said.
Novarica’s report – “Analytics and Big Data at Insurers” – is based on an April 2015 survey of 58 insurers who are part of the Novarica Insurance Technology Research Council, a group of senior insurance IT executives organized by the firm. Of that number, 42 are from property/casualty companies, 32 of which are from midsize insurers with between $100 million and $1 billion in premium. Another 10 come from large carriers with more than $1 billion in premium Novarica said. The remaining respondents are from life/annuity insurers.
The big data shortfall also applies to analytics. Novarica’s survey found that only half of insurers are actively gaining value from analytics in areas such as product development and producer management.
“While the realized business value in areas like actuarial and pricing is widespread, many insurers still have not been able to apply analytics to effectively improve performance in other areas,” Novarica noted.
P/C insurers, for example, are not using analytics as widely as they could be. Most rely on the technology in some way, but fewer than half count on it for areas including anomaly detection, identification of suspicious participants and patterns, and early warning indicators, according to the survey.
While most P/C insurers using analytics say it has given them value, Novarica noted that only 20 percent in the sample said they use it to detect and manage fraud.
At the same time, insurers are making progress in the some areas of both big data and analytics. Novarica also found:
- Predictive models are used by most insurers in some part of the value chain, most often in the areas of risk and profitability. P/C insurers use underwriter risk score models in addition to those for financial projections and product and customer profitability.
- Small insurers are increasingly embracing big data. Novarica’s 2013 study on this issue noted that big data use among small insurers was “significantly behind” their larger counterparts. The gap has lessened since then.
- Insurers will benefit most from analytics and big data if they create a culture where the information provided is valued and acted upon.