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How is the insurance industry utilising data for your benefit?

Matt Cullen, Assistant Director, Head of Strategy, ABI Matt Cullen, Assistant Director, Head of Strategy, ABI

The world now produces an unprecedented amount of data. Everything from your phone to your lightbulb creates data points which can be analysed to identify trends and take actions which seem straight out of science fiction. Fridges can detect when they’re empty and automatically order your groceries; watches can record your vital signs and pre-warn you of a heart attack; and monitoring search engine queries can help to accurately predict flu outbreaks.

Put bluntly, ‘digitisation’ is the trend with more potential than any other to revolutionise how firms operate and design products and services for their customers, and an issue no insurance executive can ignore.

So what role do data and digitisation have to play in insurance? Current industry trends suggest that there will be three areas of focus:

  1. The first is insurance fraud. The ABI estimates that insurers detect fraud valued at over £1 billion a year and honest customers end up paying for fraud that goes undetected in terms of higher premiums. Ever more sophisticated data collection and analysis can be used to more effectively prevent and detect fraud, ultimately saving customers money, and ensuring that resources can be deployed more appropriately.
  2. The second is improving the claims process for customers. Some insurers are already using sophisticated localised weather data to pre-warn customers of hazards such as floods, and aiding them in taking preventative steps to minimise their damages and costs. Additionally, as the advent of the ‘internet of things’, where customer devices and appliances are able to interact with each other and with external platforms, increases the availability of customer information, insurers will also be able to automate many of the early elements of a claim, greatly reducing bureaucracy for customers.
  3. Thirdly, using a broader range and greater depth of data in insurance pricing will help to reduce overall uncertainty and therefore average premiums, ensuring that customers pay for more personalised products which more accurately reflect their own unique lifestyle and choices.
Everything from your phone to your lightbulb creates data points which can be analysed to identify trends and take actions which seem straight out of science fiction

Yet the use of data is not without its challenges for our sector. There are technical challenges of developing the analytical capabilities to deal with information which is much more varied and unstructured than simple quantitative data, and is available in large volumes; the commercial challenges of incorporating big data accurately into pricing and claims; and the public policy challenges of using data in ways that are acceptable to consumers, policy makers and regulators.

These challenges can, and must, be met, but they will be disruptive. Insurers that genuinely embrace the digital world will not only embrace new technologies, but new ways of thinking across all aspects of the business.

Finally, we cannot predict which direction technology, big data and digitisation will take in the coming years. The industry needs to ensure it positions itself as agile and responsive, ready to innovate for the benefit of customers and make the most of emerging trends and ever increasing and exciting possibilities.

This article was first published as a guest blog on the CBI's Great Business Debate Website.

To hear more from the ABI's Matt Cullen and other speakers including Christopher Graham, Information Commissioner, register your place at the ABI Data Conference on 9 September 2015.

Last updated 29/06/2016