Data is the lifeblood of the insurance industry. Insurers use it to assess risk for what they are covering and to adjust premiums so that they can cover that risk while still maintaining a profit.
Data is at the core of how insurance companies predict the risk of someone getting in a car accident, or of having a house burn down. But, with the data they use now, they cannot be as precise about risk as they would like. But big data can change all that. The ability to collect huge amounts of data from sources that were unavailable up to now will enable much greater accuracy and precision when it comes to risk.
Here are several areas where big data will affect the insurance industry.
1. Assessing the risk for disease.
Naturally, this is very important for health insurance companies. With big data, insurers can keep an eye on clients’ current health status and determine the likelihood of people contracting diseases in the future.
With this ability, companies will better be able to fine tune their premiums according to the better view of risk available. Not only that, big data will help consumers as well by enabling them to shop around the find the best coverage at the best price.
2. Premium amounts.
Because big data will enable insurers to assess risk factors in the present and future on a large scale, they will not only be able to reduce those risk factors but also offer better service by adjusting premiums to better reflect the more accurate assessment of risk.
3. Payment of claims.
Using big data will also enable insurers to more efficiently pay claims of clients, without the waiting and the paperwork.
4. Fraud reduction
Fraud is the great bane of the insurance industry. Fraud costs the industry millions of dollars each year and results in increased costs for customers to cover losses.
But big data will also have a big impact in the area of claims fraud. Using analytics, as well as data on social media and mobile apps, insurance companies will better be able to spot connections that will help them spot fraud when they write the policies, not only after fraud takes place.