Other parts of this series:
- Data monetization – the next oil or fool’s gold?
- Insurtech firms could help carriers unlock vast data profits
- Five smart tips for successful insurtech partnerships
- Partnerships are the key to insurance data monetization
- Veracity is critical to the success of insurance data monetization
- Carriers must keep agile to stay in step with data laws
- Bold insurers are taking the lead in data monetization
What’s stopping insurers from taking advantage of their vast troves of data?
The explosion of data available to insurers has created huge business opportunities. We estimate that the monetization of data could generate up to US$8 billion of annual profit for the global insurance industry. Such profit could be earned through greater operational efficiency, improved risk management, reduced fraud and new products and services.
Coupled with the great potential of data monetization, however, is a big responsibility. Insurers that intend profiting from the information they gather about their customers, and possibly collect from other sources, must use and protect this information carefully. They need to demonstrate to their customers, employees, business partners and regulators that they can be trusted to use such a valuable resource.
Carriers already hold vast stores of data. What’s more, additional sources are opening every day as public utilities and commercial enterprises around the world hook up to digital networks and ecosystems. The Internet of Things, for example, has been forecast to grow a hundred-fold from 2 billion devices in 2006 to 200 billion by 2020.
The dramatic surge in the volume of data available to insurers has been accompanied by sweeping advances in key digital technologies. Powerful analytics and artificial intelligence systems enable insurance companies to gather, assess and distribute information on a scale unimaginable only a few years ago. The emergence of blockchain applications offers insurers the ability to identify, monitor and verify the authenticity of big volumes of distributed data.
Despite the huge potential of data monetization, most insurers have been slow to capitalize on opportunities it presents. Organizations first out of the blocks have tended to come from other industries. Multinational retailer, Tesco, for example, has built a US$1 billion a year business, DunnHumby, that monetizes grocery sales data and markets it to clients such as consumer-packaged-goods companies. Amazon and Alibaba have grown their giant online retail businesses around their ability to gather and analyze consumer data.
If insurers don’t move quickly they risk missing a huge opportunity. Other organizations may soon dominate the monetization of data. Insurance companies will then struggle to catch up. Already, auto manufacturers such as Tesla are looking to use the insights gathered from their connected vehicles to bundle insurance with their sales.
Why have insurers been slow off the mark? There are three likely reasons:
- Insufficient resources: Many insurers don’t have the necessary skills, business models and organizational cultures to take advantage of the opportunities that digital monetization offers.
- Data veracity doubts: Carriers often lack the required systems and processes to ensure that their data is accurate and reliable.
- Data protection concerns: The rise in data and privacy regulations around the world has resulted in “data fragmentation” which increases the cost and complexity of gathering, storing and distributing information. The recent public outcry over Facebook’s data management practices, furthermore, highlighted the importance of stringent in-house controls and standards to safeguard customer information and avoid reputational damage.
All these obstacles, however, can be overcome. In my next blog post I’ll discuss how insurtech firms can help traditional insurers tap the enormous potential of their data resources. For further information about monetizing data take a look at these links.