Making sense of big data could be key for the insurance industry
With the increased roll-out of the industry towards keeping all of its data electronically, insurers will shortly have more data at their fingertips than they ever had before. Major industry initiatives will further increase the availability of data to the insurer and broker market and the manner in which this will change the way the industry does business will have a major impact on the industry.
Big data's role in regulation compliance
The Financial Services Board (FSB) is on a mission to implement pieces of legislation which it hopes will improve the industry. However, one of the major concerns that the industry has is that it will be difficult to keep up with the legislation.
One of the industry initiatives which deal's exclusively with data is STRIDE. Because the company deals with data which is very in-depth in nature, the value of the data will be of such a nature that no interpretation will be needed.
Compliance teams will be able to do their job better, as Binder Regulations as well as Solvency Assessment Management requirements can be met. Actuaries will also be able to increase the value and accuracy of their analytical forecasts.
The benefits of data in the retail sector
South Africa is a bit behind their US and UK counterparts when it comes to the use of big data in the retail and banking sectors. However, they are still benefitting from it in order to identify market trends and to make faster decisions. They are also seeing massive cost reductions and time savings in terms of effective product development.
One of the characteristics of the 2009 financial crisis was that companies were not able to see the warning signs that a crisis was looming. Before they knew it, it hit them like a wrecking ball. STRIDE points out that it is possible to use big data to counteract the financial losses experienced over the past years.
"Speaking to your target audience is one of the most important aspects of a business. It is the easiest way in order for them to ensure success. Targeting the right channels with effective, clear messages is an ideal way to target and retain ideal customers,” says STRIDE CEO, Deon Olckers.
The primary use of big data in the banking sector is to avoid fraud, which is a major issue in South Africa. Like the retail sector, they can also gain key insight into their customers. Together, various players in the two industries can formulate alliances to create new income streams by building on customer intelligence and behaviours that they are able to monetize.
Do we have the infrastructure to support this?
There is no doubt that big data will have a significant role to play in the insurance industry, but do we have the IT infrastructure to effectively process this data and package it in a way in which it will make sense to the industry? Certain industry experts believe that there is still a lot of work to be done before this is achieved around big data. After data volumes are achieved, focus will need to shift to data quality and data variety. IT infrastructures will then need to be able to hold the data and allow for its intelligent use. There will also need to be a change in organisational structures and skills in order to gain the most value from the data.
"To be more specific, let's talk about commercial insurance data. All efforts thus far were focused on personal lines mapping and implementation, but we have not forgotten about general commercial lines data. Major insurers spent some time reviewing the general commercial lines standard as it was released in version 1 of the SA ACORD AML Standard. Some changes were identified to bring this more in line with the personal lines methodology, which resulted in the latest Standards release V2.1. This release includes all changes requested on both personal lines and general commercial lines, resulting in a better standard to enable efficiencies across the mapping exercises. We can now confidently say that it is safe for users to start commercial lines mapping, and time to start dreaming of all the time and effort that will be saved once double-capturing of commercial policies are eliminated,” says Olkers.
The benefits that big data can provide your business
One of the key pieces of legislation that the FSB wants to implement is Treating Customers Fairly (TCF) which hopes to create a better openness and understanding of the insurance industry. While TCF can only be officially passed into law with the adoption of the Twin Peaks model, which is provisionally tabled for 2015, the FSB has expected the industry to adhere to TCF principles from the beginning of January 2014.
In essence, big data is a perfect catalyst for TCF. If a company knows their customer, has the correct communication channel with them and is giving them the right message, there is no need to worry about complying with TCF principles as the company will inadvertently be applying these principles.
It will also allow brokers to build a solid foundation of trust with their clients. By tailor making cover which suits their needs, your customer becomes an invaluable asset where you can generate recurring business as their needs and circumstances change.
Editor's Thoughts:
Adaptation is always an important proponent to survival. The insurance industry is by no means in a bad state, but in order to be comparable with international markets, we need to adapt. Big data is possibly the best way to achieve this. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
