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How Big Data Analytics is transforming the insurance industry

The digital transformation revolution that is sweeping the global insurance industry is one that is radical. From rendering old methodologies increasingly obsolete to redrawing the playing field for even the most respected companies, this transformation is being driven by Big Data Analytics. This is a look into the 5 most important ways that insurance industry leaders are using to harness the power of data not only to generate value but also to stay ahead of the curve by creating a competitive advantage for themselves. With the increase in the usage of social media, mobile phone ownership and the growing adoption of IoT (Internet of Things) enabled devices, this trend of using data and its analysis to gain an edge over competition, is showing no signs of slowing down. Just accessing this blog to read about this topic, has also generated data.  

Where has all the data gone?  

Every picture that has ever been uploaded, or PDF that has ever been downloaded, every video that has been streamed and even every packet of location-tracking information reaches a destination. Usually, that destination is with companies who have bought our (kinda) informed consent and then use the information that they receive to advertise to us, in a much more effective manner. Have you ever had a fleeting thought about getting a DSLR camera and then realised that you are being inundated with ads for the latest DSLR cameras? That’s the power of Big Data. 

Big Data is gathered and analysed – more and more by Artificial Intelligence (AI) and Machine Learning (ML) powered technology – so that companies are in a better position to gain an insight into the minds of their customers as well as their own internal processes and the changing world around them. We have seen that many of the companies who have been inclined towards innovation and create new products, have been using Big Data analytics for years to both develop and maintain their competitive edge. Going by the clearly evident and current trends across industries, the companies that are going to stay their courses and see substantial growth are the ones that are going to be data-driven.  

Fortune has predicted that, by 2026, the entire market value of Big Data analytics will be in excess of $1trillion. Those companies that are not a part of the Big Data revolution that is sweeping across the globe stand the very clear and evident danger of falling far behind their peers. And, this is especially true for the insurance industry. 

Data and Analytics in insurance 

According to the global professional services and accounting conglomerate, KPMG – “Insurtech is having a transformative impact upon the global insurance market – the role of data is absolutely central to the entire project. Data is not simply the facilitator for better underwriting and keener pricing, but is the very DNA of the 21st-century connected organisation.” 

The insurance industry has for long been a gatherer as well as a user of vast amounts of data. Insurers have traditionally used highly mathematically-skilled actuaries to decipher complex sets of numbers to understand risk and write policies. In the recent past however, the rapid advances both in computing technology as well as in the explosion of new digital data sources have greatly expanded and reinvented the core disciplines of insurers.

Big Data is one of the areas that are completely revolutionising core aspects of the insurance sector. Here’s a look at the five main areas of insurance that Big Data analytics is transforming:

  1. Pricing and Underwriting  

The main aspect of value creation for the insurance industry has always been its ability to accurately assess risk and price insurance policies. Big Data has greatly enhanced their abilities to do so by giving them access to larger data sets, and more detailed information about individual customers. By providing insurers with access to more granular datasets, they are able to design and offer to customers policies that more closely reflect the risk posed by an individual, rather than the demographic box they belong to. But, this does not mean that the older analytical strategies that have been used by insurers for centuries, are being discarded. 

According to a report by the European Insurance and Occupational Pensions Authority (EIOPA), “traditional data sources such as demographic data or exposure data are increasingly combined (not replaced) with new sources like online media data or telematics data, providing greater granularity and frequency of information about consumer’s characteristics, behaviour and lifestyles.” This has resulted in the emergence of a new generation of companies that are leveraging the extensive experience of their industries gained over the years along with the additional power and insight provided by Big Data collection and analysis to gain effective and actionable insight in the core areas of pricing and underwriting.  

  1. Health and wellbeing 

IoT-powered wearables are making their presence felt by creating a massive impact in the personal health insurance space. Much like the way in which onboard telematics devices in vehicles can track and monitor a range of customer driving habits and allow insurers to reward safe drivers, devices like the Fitbit and Apple Watch’s Health App can track wearer habits and promote healthy behaviour, leading to insurers being able to offer them lower premiums. Due to the availability of data that is individual-focussed, insurers can now customise insurance plans to suit particular individuals. This is done based on the data gathered on that individual’s behaviour and health. Companies like AliveCor offer devices like the KardiaMobile, a personal EKG monitor that allows cardiovascular health data to be shared remotely with health professionals and insurers. UK-based insurer Vitality offers premium discounts based on the activity points that can be earned via use of Apple watches and demonstrated activity levels. 

  1. Settlements and claims 

Insurance customers have long been used to a long and arduous claims process, as their claims are assessed and liability determined in the process to decide if a payout of the claim is warranted and justified. Using AI, insurers today can segment and analyse claims much faster than ever. Some insurers have already been successful in fully automating their claims process. 

  1. Policy developing and tailored insurance

The increase in the level of personalisation is not confined to the insurance industry alone. Companies around the world use highly detailed datasets to be able to tailor the experiences of their customers. Remember the DSLR camera? 

Traditionally, insurance used risk classification to set prices for groups of people with similar risk profiles. Big Data provides new sources of information for understanding and analysis of policyholders, thereby providing insurers the ability to fine-tune risk classification. The further segmentation that Big Data makes possible for these risk groups, allows insurers the ability to offer policies that are fine tuned to meet specific situations and clients who might not have earlier had access to affordable insurance coverage.  

  1. Customer experience 

Customer service experiences across many industries benefited immensely from the use of AI and ML powered Big Data Analytics. This is in no small part due to the ability of insurers to leverage AI and ML to deliver more personalised and effective customer service experiences. 

An insurer, Lemonade uses a proprietary AI called Jim that helps them to administer their claims. The point will soon be arrived at where we can expect computer systems powered by AI and ML to safely handle larger and more complex decision making roles. The benefits of AI and ML can also be seen in their ability to build more detailed profiles of customers by tapping into external datasets to find similarities in internal data to produce holistic customer profiles. Put to use in a call centre situation, AI can be used to analyse call volume, the primary reasons for calls and the types of customers that are most likely to call during certain times of a day. Such insights will allow insurers to ensure adequate staffing at times of high call volume to reduce wait times, as well as availability of adequately qualified executives to handle specific types of calls. Chatbots are also handling a growing volume of customer queries and freeing up executives to handle more complex tasks. 

Looking ahead

There isn’t going to be either a stop or a slowing down of the global digital transformation in the insurance sector. With the influx of InsurTechs like Lemonade, Surround and Flock (which uses Big Data analytics for drone insurance), legacy insurers need to adapt, adopt and evolve quickly.  

With specialised solutions for the insurance industry, Neutrinos is helping leading insurers take impactful digital transformation decisions. We are experienced in legacy modernization and integration of new age technologies to help insurers achieve their growth objectives. With our insightful and incisive approach to developing affordable business solutions, we ensure that clients are able to leverage the disruptive edge of technology.  While keeping an eye on the ROI, Neutrinos offers clients in-built capabilities for the adoption of emerging and futuristic technologies such as IoT, AI and ML, Reach out to our experts at for more details! 



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