In the first part of this series, we talked about the explosion of external data sources in insurance. Although these sources are not all new, they have changed the ways we share and use the data. Add to that the entry of non-traditional rivals onto the insurance playing field, and it becomes clear that traditional carriers can’t just wait for others to figure it out. It’s time to take the initiative in harnessing the vast amounts of external data.

Some insurers are already looking at new ways to utilize external data. Liberty Mutual, in a partnership with Google’s Nest, offers a monthly discount on homeowner insurance. John Hancock offers a fitness tracking service to customers willing to share data from Internet-connected Fitbit devices in return for a discount.

There are also opportunities for consumers to easily share data that might be relevant to underwriting. I wrote about one example, BMW’s CarData system, earlier this summer.

Then there are startups such as Metromile, which entered the auto insurance market with no proprietary data, but quickly gained customers and created its own data by developing a new insurance distribution model – selling car insurance by the mile.

According to Silicon Valley Data Science’s report titled “Data Opportunities in Insurance,” Metromile “has both disrupted the industry and put pressure on incumbent insurance providers to make advances with their own distribution models.” The authors of the report outline three ways to use new data in underwriting: 1) Offering usage-based insurance (aligning premiums to customer behavior and need); 2) Leveraging external data (social data can help insurers gain a better understanding of different risks); and 3) Leveraging real-time data (using apps to engage with customers, resulting in more accurate data and more accurate rates).

A recent Financial Times article echoed the sentiment: “This is where AI and big data are expected to shake insurance up: not just in processing and customer service, but in core skills such as underwriting, where the insurers assess — and price — each customer’s risk.”

Accenture’s “Harnessing the Data Exhaust Stream” report outlines three core sources of value that insurers should focus on:

  1. Continue to develop proprietary insights into risk selection and pricing;
  2. Use internal and external data to improve the ability to segment the available market and improve customer experience;
  3. Increase efficiency and reduce overall costs by using data to digitize and automate the existing processes.

The external data revolution will also make it possible for insurers to create new products and new revenue streams, but only if they approach it the right way. Coming up next we will take a look at what lies ahead on the data horizon for insurance. 

To learn more, register to download “Harnessing the Data Exhaust Stream”.

You can contact me with your comments, questions and feedback.

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