Insurance Companies Are Emerging as Big-Data Leaders

“Insurance [companies] see huge changes coming from big data, so much so that the only sectors seeing more changes are technology and media,” Anand Rao, principal in the advisory practice for PwC, told Chief Executive. “Every other industry is below them in terms of CEOs’ perceptions of disruption by big data in their industry.”

Arguably, actuarial tables were among the original applications of big-data analytics in all of business, but the industry has come a long way since then.

“That process of assessing quantitative data and adjusting go-forward processes is a very natural action for insurance leaders and executives,” Wes Hunt, chief digital officer for Nationwide Insurance, told Chief Executive.

“So what we’ve sought to do is extend the confidence around taking action beyond the traditional insurance products, such as how do we make the customer experience great, and how do we improve the IT-development life cycle so we build higher-quality software at a lower price, and how do we use it to deliver a great claims experience for our members?”

One such innovation at Nationwide has been Hunt’s directive to build software models that use data from consumers’ digital trails to predict transitions in life, times at which individuals might be open to considering a different kind of insurance.

Of course, Nationwide and other auto-insurance companies for years have used voluntary programs to offer discounts to customers in exchange for big-data “telematics” transmissions from their vehicles that inform the insurer not only about the individual user’s practices but also, collectively, give them insights to improve coverage and products. It’s helping insurers quickly adapt to the era of ride-sharing and also prepare for self-driving, Rao said.

Another increasing use of big data in the insurance vertical, Rao said, is its use to design models to better predict crop yields.

And some life insurance companies are using big data to calculate “vitality ages” that take into account diet and exercise, not just chronological ages.

Eileen McDonnell, CEO of Penn Mutual, believes that modern big-data applications may help the industry finally move the needle significantly in boosting the numbers of Americans who choose to purchase life insurance. The industry broadly is insuring only the same number of lives it was when America’s population was just one-third of what it is today, she said.

“Today a lot of people avoid acquiring an individual life-insurance policy because of testing requirements,” McDonnell told Chief Executive. “No one likes to go to a doctor or a lab. But now there’s enough big data out there where someone’s information around their prescription history, and their medical-testing history and other social behaviors, can be just as useful in this process and streamline it.

“The consumer benefit is that it will simplify the underwriting process, which hopefully will allow more individuals to acquire our much-needed product.” In turn, that will drive even more usable data for insurance companies to learn from.