The ever-changing challenges facing the insurance industry make it imperative for insurers to harness the power of data and analytics. The valuable insights that come from analyzing data drive insurance companies to solve business problems. Analysis of structured data related to policyholders and unstructured data from various sources, including social media, helps insurers analyze the risks associated with insuring a person who has opted for an insurance policy. This is also necessary to determine the premium to be charged.
In addition, Big Data and analytics have also profoundly impacted customer insights, claims management, and risk management. Here are five ways Big Data has transformed the insurance industry:
1. Stand out from the crowd – Competition in the insurance industry makes it important for any insurance company to define and prove its efficiency relative to its competitors. This can be guaranteed by offering their products at a lower price, without compromising on impeccable customer service. Big Data and analytics help insurers simplify business processes and meet changing regulatory requirements.
2. Streamlining business processes – Big Data helps insurers to make policy recommendations that are not only in the interest of the customer, but also in the interest of the company. This is only possible through data analysis.
3. Get valuable insights about customers – As customers’ needs and preferences change frequently, it is a constant challenge for insurance companies to keep up with them. Big Data helps insurers understand and predict customer behavior, effectively in customer acquisition and retention. This makes it possible for insurers to develop products that suit the ever-changing tastes of their customers and ensure smart insurance distribution.
4. Managing claims to identify fraud – The insurance industry often suffers heavy losses from fraudulent practices, with nearly $80 billion being the estimated amount for fraudulent claims. Predictive analytics help insurance companies address the proliferation of such claims, analyze data from internal sources, and identify applicants with a greater tendency to resort to fraudulent practices. They can also use data mining to monitor digital channels through social listening to detect fraudulent behavior.
5. Risk management – Big Data and analytics help insurers formulate policies, especially those for natural disasters, taking into account policy terms, historical records, and similar other technical data. The insurance distribution process becomes relatively streamlined when insurance companies can decide catastrophe policies based on accurate big data such as home address and other key factors, rather than just the city or state. Big Data solutions can automatically update their pricing models for efficient insurance distribution.
The above factors perfectly demonstrate how Big Data and analytics are the foundation for insurance company balance and ability to keep pace with changing times.