The Good, the bad and the Big Data Sherriff
“Information should be at the core of any functional society. The more we learn, the better we become at applying new concepts, ideas and changes,” Alec Hogg, Founder Biznews.com. The industry has been embracing Big Data for a while now. Of all the trends that are likely to impact the industry in a meaningful way, Big Data looks to be one that will take centre stage.
Heavy hitters weigh in
While the true impact of Big Data on the industry remains to be seen, intermediaries can be sure that its value cannot be discarded. Insurers have, for a number of years, been designing products according to information received from claims statistics.
Added to this is the fact that the regulator is now making its presence felt when it comes to Big Data. At the recently held Acord Forum Southern Africa, the Financial Services Board (FSB) said that data is becoming a major focal point at the regulator as it will make a significant contribution in terms of building a sustainable industry.
Where are we now?
We are currently operating within an industry where the principles (objectives/outcomes) of Treating Customer Fairly are driving your daily business. The FSB expects that everything that we do needs to be driven towards positive customer outcomes.
Some industry role players are measuring up to TCF quite nicely, others are struggling. Speaking at the Acord Forum, Farzana Bahadat – Head of Compliance at the FSB – said that Big Data could possibly hold the key for those who are struggling with TCF.
“Big Data facilitates the identification and the explanation of conduct risk. You cannot run a sustainable business if you do not have a handle on customer risk. Meaningful regulation and management reporting requires the consolidation of accurate quality, useable data from various distribution touch points,” said Bahadat.
An ideal situation
This all makes sense, and it is not as if insurers and intermediaries have been completely blind about the value of Big Data. They have recognised its value, and are making sense on how it can add value to their business.
This is also in line with the thinking of the FSB who have said that it is not enough to have Big Data and to show this fact to the FSB. There needs to be interpretation.
Bahadat pointed out that there needs to be ongoing, proactive demonstrable management of conduct risk indicators that are ultimately manifested in:
- Continuous improvement in product design, service delivery and customer experience;
- Fair pricing;
- Appropriate products; and
- Clear, understandable product disclosures.
The outsourced outlaw
Perhaps the biggest part of the industry that will be impacted will be outsourced partners. The FSB has taken a bit of a hard stance on this issue making its standpoint very clear.
“In the future, companies won’t be able to outsource functions unless outsourcing enhances the operational efficiencies of the business, eliminates the duplication of efforts and costs, leads to improved conduct of business reporting, and ensures a better customer experience,” said Bahadat.
Knowing the FSB, it will not be enough to hit the mark on just one of the above mentioned aspect in order to validate outsourcing, insurers will need to hit the mark in every aspect.
According to Bahadat, efficiency will be demonstrated by the capability of outsourced partners to integrate with insurers systems to enable constant access to up-to-date, accurate, quality usable and verifiable secure and complete information.
This is the standpoint that will be applied going forward, but will also be the standpoint looking back at outsourced agreements that have already been put in place. This will be assessed on a case by case basis, and there will be a transition period whereby companies will need to comply with recommendations set out by the FSB.
How do we get there?
What is being done to get us to the place that the FSB wants us to be?
Bahadat pointed out that the FSB has formed an Industry Short-Term Insurance Data Task Team where it is collaborating with the likes of the South African Insurance Association (SAIA), the Financial Intermediaries Association of Southern Africa (FIA), Acord, Astute and TransUnion to develop a framework for insurance data exchange within the short-term industry.
Formulated in March 2016, the project consists of specific work streams which seek to enhance the collection, interpretation and storage of data across the whole data chain.
Why is there a need?
There is a need for this in the industry. Bahadat pointed towards three cases where there has been a disagreement between binder holders and insurers when it comes to data. The first case affected 50 000 clients, the third affected 30 000 clients and the number of clients affected in the second case is unknown, but Bahadat suggested high numbers.
We are not at a stage where the industry is perfect, and we may not get to that position. What the FSB is probably looking for is progress rather than perfection at this stage.
Editor’s Thoughts:
There will always be bad apples in the industry. The only way to root them out is to apply the same rules across the industry. However, let’s just hope that the regulator doesn’t see every binder holder agreement as “rotten to the core”. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
