Traditionally, carriers have relied on their own data, and on structured information from various bureaus and agencies, to make decisions. The game has recently changed, however, and the pace of change is rapid. Insurers are finding that they must creatively explore, mine and harness external data to remain competitive, to convert new opportunities for growth and to achieve improvements in the loss ratio.
The flood of external data is transforming not only the way insurers evaluate and price risk, but the way they interact with customers, transact business, and design products and services. New data is coming from sources such as:
- Government and third-party databases which have been digitized and made available to the public.
- Customer reviews and discussions of products on social media.
- Data from the Internet of Things—telematics information from automobiles, sensor data from connected homes and visuals from drones.
Other related trends for insurers to consider are:
- Like in other industries, insurers can expect dramatic changes in the ways they market, price and deliver products.
- New competitors such as aggregators are appearing with simplified approaches to product purchasing and more frictionless customer experiences.
- Insurance is becoming much more dependent on external data and the analytical models and processes needed to make sense of it.
- Armed with data and insights, insurers can explore new types of business, such as insuring players in the sharing economy.
Successful insurers will need to adapt to a rapidly changing landscape by becoming not just more data-driven but more flexible and responsive. The old industry model—with data and technology operating in their own controlled, isolated environment—will no longer work. Instead, teams working throughout the enterprise should be able to obtain new, unstructured data sets and the technologies required to obtain valuable insights.
It is becoming increasingly clear that external data—combined with industry knowledge, process expertise and sophisticated analytics—will be the basis for success for insurers going forward. Harnessing external data is a complex undertaking, but insurers can start by developing a comprehensive plan and then undertaking specific, high-return initiatives that build momentum and help transform the enterprise into a winning competitor in the new digital arena.
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Harnessing the Data Exhaust Stream
Read more about how external insurance data and analytics is changing everything, from pricing risk to interacting with customers.