“Better to have it and not need it than need it and not have it.”
That old saw may make sense for a lot of things, but it is the absolute wrong philosophy for big data utilization, especially for insurers.
Big trouble with big data
With 2.5 quintillion bytes of information created every day, according to IBM, saving everything that could be valuable to a person or a business isn’t practical. At this point, it’s downright impossible. As data science progresses and improves, we will create more channels of acquisition to soak up more data to fuel better analytics further exacerbating our hunger for more information, and so on and so on.
To stop the ever-widening gyre of big data, the industries that have been transformed by its promises must learn to curtail the mindless harvesting of any and all information. A recent article from The Wall Street Journal highlighted one of the flashiest big data addicts in the biz: the National Football League. Since 2015, the organization has placed radio-frequency identification chips in players’ shoulder pads to capture their speed and movements during games. Ultimately, the goal is to develop cutting-edge statistical metrics that can assist coaches in decision-making on and off the playing field. But as the NFL struggles to identify what particular information is valuable, everything’s fair game.
Insurance has a similar problem – according to research from Tata, insurance companies use only about 10 to 15 percent of the data available to them. Insurers know the intelligent and efficient utilization of big data will have a profound effect on how they quote new customers, engage current policyholders, structure policies and investigate claims. But how can they get from collecting data willy-nilly to deploying it in innovative ways that actually drive their businesses?
Target specific value propositions for your business and your customers
Without putting too fine a point on it, the root of the NFL’s current big data glut is its collect-first-ask-questions-later attitude. It’s a pattern insurance providers can all too easily fall into with so much nebulous potential floating out in the ether of risk management. What insurers should do is pick a path, stick with it and flesh out the rest once they’ve got a handle on what matters most to their CFOs, their clients and their values.
Companies need not look further than Flo, the spunky, lipsticked face of Progressive. ZDNet reported the auto insurer collected 10 billion miles of driving data in the first six years of its optional Snapshot program, which tracked driver speed and brake use with a plug-in telematics device. Policyholders who wanted in had the opportunity to lower their premiums upon exhibiting control on the road. In addition, Progressive had the opportunity to test run its algorithms and get a jumpstart on an age of granular risk analysis. Win-win.
“Insurers should start at value and go from there.”
In laying the groundwork for what does and doesn’t constitute intelligent, cost-effective collection of data, insurers should start at value and go from there. Value can mean anything: what will make the most money, what will draw the widest client base, what will fix the biggest issues, etc.
Avoid indirectly penalizing slow adopters or nonconformists
Not every policyowner, prospective or protected, will be as gung-ho about big data collection as insurance companies are. Perhaps they don’t understand what information their insurers plan to glean. Perhaps they can’t visualize how this data will ultimately fuel better service. Perhaps they simply think mining is an intrusion on their personal privacy. Whatever the case, insurers must actively combat this reluctance but with a soft touch.
As insurers set a course for greater analytics capabilities and deployment, they should assiduously watch projections like those provided by Towers Watson back in 2015 that predicted huge growth in small or emergent data sources like social media and “smart-home data.” Additionally, while “usage-based insurance/telematics data” similar to Progressive’s Snapshot campaign continues to dominate, more passive channels like virtual agent and customer interactions will play major roles in how insurers capitalize on upstream information.
In short, if customers are unwilling to hook directly into a doohickey and blindly fork over data, focus on improving engagement at the sales level. Furthermore, try to avoid stratifying cost savings between the two. Conversations, while perhaps not as efficient as a hardline into data as it is created, are still worthy of your investment and attention.