It’s not enough to have lots of useful data. Digital insurers need to define a whole new data value chain.
Insurers have always benefited from a lot of data, and they are good collectors of historical data related to risk. But, as I have been arguing, the trend that we call “the digital-physical blur” is changing the game in both quantitative and qualitative terms.
Just to give you an idea: Gartner predicts that the number of connective devices will grow from 0.9 billion units in 2009 to 26 billion units in 2020. That’s a gigantic increase. Now factor in that over the same period the devices themselves—phones, PCs, fridges, cars, smoke detectors, traffic lights, sensors of all kinds, personal devices—will become progressively smarter with the rapidity we have come to expect from the IT industry. That, in turn, will mean that there will be more data per device, and it will be more valuable.
Of course, insurers have recognized this trend and are progressively investing in the heavy-duty analytics tools needed to deal with this big data, and turn it into useful insights. But beyond implementing the tools needed to process and analyze big data, insurers will need to consider carefully where they want to position themselves in the extended insurance value chain. This value chain is increasingly a data value chain, or data ecosystem, as portrayed in the diagram below.
Building and managing this new data supply chain will have significant implications for insurers, and I will return to the topic in future blogs as our teams research the topic and work with clients. But what’s clear now is that the true value of this data can only be realized when it is aggregated to generate penetrating insights into customer behavior in near real time, thus allowing the insurer to respond to its customers’ lifestyle needs in an appropriate way.
That means that insurers (and, more particularly, employees within them) don’t just need access to data-driven insights. They need it fast, raising the second imperative for data: velocity.
Next week, I’d like to conclude this brief meditation on data and the future of insurance by going deeper into the concept of the data supply chain.
For more on the data supply chain as a trend affecting the future of insurance, read From digital wallflower to digital disruptor. Another good source of information is Achieving payback in insurance analytics.
Gartner, Forecast: The Internet of Things, Worldwide, 2013.