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Big data a big deal? For many U.S. life, P&C insurers, not yet

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Business intelligence and analytics are top priorities for insurers, and their capabilities, which have grown in importance to industry in recent years. But the carriers have fewer “grand plans” for big data than they did in 2013, the last time Novarica polled CIOs on this topic.

So concludes Novarica, a provider of technology strategy research, advisory services and consulting, in a report that examines the big data capabilities of U.S. insurers — including providers of P&C, life and annuity products — and the benefits they’ve derived from the technology. The report is based on results a survey of 58 insurer CIO members of the Novarica Insurance Technology Research Council, conducted in April 2015.

“When it comes to big data, insurers are engaging in a limited manner, most commonly leveraging consumer, business and geospatial data for benefits in actuarial/product modeling and underwriting,” the report states. “Few insurers have invested in the specialized infrastructure required to manage big data, but about a quarter of those who haven’t yet, are planning to do so within 12 months.

The report defines big data as internal and external data, structured and unstructured, typically collected in enormous volumes at a rapid speed. It is generally characterized by the “3 V’s” — Volume, Velocity and Variety — and is often too large to be processed by traditional technology.

Among the report’s key findings:

  • Only about half of insurers actively derive value from analytics in key areas like product development and producer management. While the realized business value in areas like actuarial and pricing is widespread, many insurers have not been able to apply analytics to effectively improve performance in other areas.

  • Predictive models are used by most insurers in some element of the value chain, with the most commonly used models focused in the areas of risk and profitability. For life/annuity insurers, common models include financial projections and both product and customer profitability, while P/C insurers also commonly use underwriter risk score in addition.

  • Big data is becoming more important, but is not yet a priority at most insurers. Most carriers are still maturing and expanding their use of traditional data analytics and predictive models to improve processes, reduce losses, and generally improve their book of business. Insurers have become more conservative in their projected adoption plans for big data in the last two years.

  • Smaller insurers are also embracing big data. In Novarica’s 2013 study, big data usage among smaller insurers was significantly behind that of larger insurers. This gap is narrowing.

  • Insurers best positioned to profit from the value of analytics and big data have created a culture wherein business leaders trust analytics and act on the insights provided. 

The 58 insurer CIOs polled identify the following as current and expected sources of big data: