An explosion of information is coming, but the insurance industry in Ireland may not be equipped to take advantage of it, a new survey has revealed.
According to BearingPoint Institute's latest report on big data and the sector, companies are at risk of being bypassed by so-called "digital natives" such as Google, which are more comfortable and better equipped to take advantage of the opportunities presented by an influx of data on consumers.
Although companies recognise the benefits of big data for their business, the action to back it up on the ground is lagging behind, it says, and insurers cannot afford to respond slowly. There are encouraging signs though that companies are beginning to prepare for it, with 80 per cent of the insurance firms saying big data will have their “maximum attention” by 2018.
The report looks at insurance firms around the world and their readiness for the rapid increase in consumer information. Among the findings of the report, it discovered that only 10 per cent of companies in the sector had a clear strategy in place to use big data and advanced analytics.
Among the reasons identified by the report for the reluctance to adopt big data is an aversion to risk and an unwillingness to fail.
"Historically, insurance companies are very mature in analysing data. They have done it for many years; it's the basis for the business," the report's author Patrick Maeder says. "When we look at the new opportunity by adding new external data or leveraging new methodology or tools in the analytics side, it probably has to do with the nature of the insurance business. What we've seen is that big data could become quite disruptive for the insurance industry . . . ," although he says it is difficult to predict when that will happen.
It is not the fear that Google or similar firms would enter the insurance industry themselves, BearingPoint’s Martin McKenna explains, rather that they would form partnerships with rivals, giving them the advantage in the market.
This could take the form of more personalised insurance packages, based on the data collected from destinations, driving ability and lifestyle.
Maeder points to the motor industry, with car manufacturers such as Volkswagen providing insurance packages to customers, and to the retail sector, where Tesco has been offering insurance products to consumers, as two industries that were being altered as big data attracts different players to the market.
“In addition, we see more and more data aggregators like telecoms providing additional external data for use such as mobile information,” he says, citing TomTom’s provision of insurance packages and partnership with insurance firm as another example. “All kinds of unknown benefits lie ahead in big data,” Maeder adds.
However, there is a “vicious circle” that is holding back the adoption of strategies to capitalise on these benefits, including a lack of ownership at a business level by about half of firms, with big data being left to the IT department.
The report also puts a price on personal data, with general information such as age, gender and location worth about 36 cents per 1,000 people, access to information on people taking a specific medication costing buyers 18 cents per 1,000, and car buyers worth €1.53.
There have already been some movements on the international market in adapting to the digital world, including a recently announced strategic partnership between Axa and social networking service Facebook. "It's high on the agenda of the multinational companies," Maeder says. "We feel the awareness is there and the insurance market is starting to move and position themselves."
It could take another two to three years before companies have the relevant skills and strategies in place, and begin seeing big data and analytics as more of an opportunity and less of a threat, he adds.
McKenna says he is confident that Irish firms will follow the lead of the global firms in adopting big data as part of their strategy, particularly given that many of the international firms are major players in the Irish market. “We think the same will apply to the domestic Irish insurance market, maybe not at the same rate initially, but we believe they all see the benefit and the challenges associated with big data exploitation.”
The introduction of postcodes next year should also improve the usefulness of big data, McKenna says, and accelerate its exploitation. “It’s certainly been the trend in other countries.”he said.
