Lately, much has been written about Big Data and the exponential growth of data generated for insurance companies. However, for most insurers size is not the problem when it comes to data. In a recent study by analyst firm, Strategy Meets Action, Big Data in Insurance found that insurers are more concerned about the variety, veracity and velocity than the volume of data being created in today’s digital environment.
- Variety – From PDF and Word documents to email to video to geospatial imagery to social media and even prescription data, the variety of information being used by insurers today is significantly different than what it was 5 years ago. The variety may represent the biggest challenge for insurers but it is potentially the biggest game changer for the industry.
- Veracity – It does not matter how many terabytes of data is stored in your data warehouse. If the data is unreliable, its’ useless. Hence, data quality and maintaining the accuracy of the data is essential.
- Velocity – Telematics, social media, and other data is streaming into insurance companies in real-time. At the same time, insurance executive expect insights into the data almost simultaneously.
- Volume – Whether its gigabytes, terabytes or petabytes of data, nearly all insurance companies are now finding it too costly to store all this new data. To overcome this problem insurers are taking advantage of commodity hardware like Hadoop. This was confirmed by the research that found over 50% of insurers are using or considering using Hadoop.
Big Data is no longer a fad. Its usage has gone beyond the experimental stage. In fact, the research found that investment in Big Data initiatives by ALL insurance companies has dramatically increased in the past 12 months. Most notable, tier one insurers with revenue over $1bn, where investment has grown from 14% in 2013 to nearly 40% this year.
Despite all this investment, if insurers are going to achieve the strategic transformation and innovative potential of big data, they must start by determining how big data can add Value (AKA the 5th V) to their business. Ultimately, insurers should stop thinking of Big Data as a challenge and start seeing Big Data as an opportunity.