In a recent blog I wrote about how big data is a game changer for the insurance industry. But the question that is often asked “What is big data”?
Many people associate big data with the 4 V’s:
- Volume – The sheer size of data that is produced.
- Velocity – The speed with which carriers generate data.
- Variety – The different forms of data that is created.
- Veracity – The quality of data and information
However when I think of how big data is changing insurance I break it down into three categories:
- Unstructured data – The insurance industry has always been heavily paper based industry. Whether it is adjuster notes, police reports, medical records and underwriter information. Until recently it has been difficult for insurance companies to analyzer that data. With new technologies like text mining and sentimental analytics, insurers are beginning to gain useful information from this previously inaccessible data.
- External data – in the past insurance companies have been focused on their own internal data. The data created and stored in their transactional systems like policy administration, claims management, billing and agency portals. Today insurance companies are supplementing that data with external third party data. Whether it be credit scoring, government demographic data even geo-spatial data like weather information and google maps.
- New data – this is data that previously was not even imagined 10 years ago. Social media data, telematics data – information from in-car data recorders to monitor driving behavior and the now the potential from the Internet of Things.
Data has always played a critical role in insurance. The insurance business is built on analyzing data to understand and evaluate risk. There is no doubt that big data era will impact insurance industry. Data on its own will not transform the industry it’s the insights from analytics that will give insurers new strategies and operational insights into their business.
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