Embracing big data as a game changer
The era of big data is upon us. The volume of valuable market data that is currently available to be mined is unprecedented. Converting raw data into knowledge provides market intelligence which is critical to the success of business.
Big data is also having a game changing effect on enterprise wide risk management (ERM). The impact of creating a high functioning and capable team to exploit the opportunities of big data is what will provide businesses with a competitive edge. The hunt for the right data analytical talent is fuelling a global skills shortage. In South Africa, actuaries are poised to fill this skills gap.
Successful use of big data
Eric Schmidt of Google spoke at the The Year Ahead: 2014 Conference and said that insurance is the most obvious industry to explode with the uses for big data. He identified that better costs controls and more efficient delivery of services are two ways in which data can transform industries.
Companies have always regarded internal data, which can be analysed and used to generate growth from existing clients through service and retention, as a business asset. Internal data is normally obtained from internal systems and is a closely guarded dataset. The integration of external and internal data obtained from traditional data sources, can facilitate a deeper understanding of enterprise risk exposures.
ERM and big data
All sectors can experience gain through the use of big data. However, the finance and insurance sectors are positioned to benefit more.
Insurers manage underwriting, investment portfolios and operational risks by accumulating as much reliable information about the risk as possible. Insurers who can process and analyse big data as part of their enterprise risk management will have a competitive advantage over competitors.
Technology such as telematics and analytics are already having a huge impact on risk management in the insurance sector. Big data has the capacity to increase the accuracy of risk modeling by reducing the gap between the known variables and the unknown variables. Market conditions are changing more frequently and data is available to be analysed to assist with real time decision making.
Talent needed to support big data analytics
The Mckinsey Report entitled: Big Data, The next frontier for innovation, competition, and productivity provides that:
o A significant constraint in realising the value from big data will be a shortage of talent, particularly of people with deep expertise in statistics and machine learning, and the managers and analysts who know how to operate by using insights from big data.
o They project that 1.5 million additional managers and analyst will be needed who can ask the right questions and consume the results of big data effectively by 2018 in the US.
o Organisations cannot fill the skills gap by simply changing graduate requirements and waiting for people to graduate, although these are good initiatives. It will be necessary to retrain a significant amount of talent which is already in place.
The Insurance Sector Training Authority (INSETA) conducts annual research to gather labour market intelligence on the future skills needs. According to the 2013 Sector Skills Plan, there is a critical shortage of data analysts.
Actuaries developed
Traditionally, a data analyst is difficult to produce. It would require a person with exceptional mathematics skills who will train for years to be proficient at deriving insights from big data. Peter Temple, who is the president of the Actuarial Society, believes that actuaries are ideally poised to exploit the need for data analytics skills.
Actuaries who are already skilled at using their analytical, statistical and mathematical skills can apply these skills in data analytics. INSETA partners with the South African Actuarial Development Programme to develop Black Actuaries through the provisions of bursary and mentorship for unemployed youth who are chosen for the programme.
