Consumers are becoming more aware of big data, particularly do to data breaches that have plagued many major companies. However, most consumers are concerned about privacy and not with how access to data is going to transform industries. The insurance industry is a great example of this.
If insurance companies don’t learn how to utilize big data correctly, we could see a change in who the big players are. Google, for example, is a master of big data gathering and analysis, it’s very possible that they could turn to offering insurance themselves, boxing out other smaller insurance companies.
Big data in the insurance industry could revolutionize fraud prevention by tracking client behavior and major events. It could upend the car insurance industry through customization of commercial and technical pricing. That doesn’t mean that big data is all good for the insurance industry though. While big data will bring a number of positive changes to the industry, it also faces many difficult roadblocks because the industry is so heavily regulated.
Valentina Paduano, enterprise risk management specialist for Prysmian S.p.A. in Milan spoke with attendees of the Federation of European Risk Management Association Forum 2017 conference in Monaco about big data in insurance. According to Ms. Paduano “The management of big data is not an easy process. The main risk is related to the incapacity or difficulty of collecting data in an accurate and complete manner and transforming the information into knowledge — a process complicated by a lack of modern and effective information technology and skilled personnel or a lack of or inadequate governance structure.”.
Again, the biggest hindrance to innovation around big data in the insurance industry is regulation. Imagine an insurance business that offers reduced premiums in exchange for access to your data. This makes sense for both the consumer and the insurance company, but due to regulation restrictions it’s very difficult for one company to try this. In time, we may see ideas like this become more prevalent in the insurance industry, but the reality is it will probably take more time than most of us want.