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Big Data + Analytics, the key to transform the Future of Insurance Industry
May 15, 2017

Few weeks ago, I was invited to present a recent study on the state of supply and demands of analytics in Asia Pacific, a white paper recently commissioned by Asia’s Cloud Computing Association, at the Asia Insurance Review’s 2nd annual conference on Big Data and Analytics for Insurance in Singapore.

The Insurance industry can accurately trace its formation to the Great Fire of London on September 2, 1666 (Source: Internal Risk Management Institute: https://goo.gl/yGuQ6f). Most Industries evolve over time and we have witnessed that but Insurance industry is one in which the fundamentals haven’t changed much – A Insurance provider models a set of risks, determines which factors indicate variations in those risks, creates/refers a standard rating model based on standard factors, collects data pertaining to these factors and then computes a premium rate. This has been the traditional model and till date the industry hasn’t changed much – Product centric with personalized variations to compute premiums and coverage.

Today, two major factors which are set to transform the future of the Insurance Industry, in a way it hasn’t seen in its entire history – Big Data and Analytics, will bring the paradigm shift in the insurance industry from being a product centric to a customer centric industry.

It is estimated that by 2020, 80% of the global population will have access to mobile and there will be more than 30-50 billion connected devices globally (research courtesy by Cisco, IBM, Ericsson and leading research firms) – Social Media, Mobility, Smartphones, Internet of things and unprecedented access to information, such as competitor product and service reviews, are giving greater power to costumers, creating more informed, demanding and empowered customers. These experiences are shaping customer expectations across all industries, including insurance.

Internet of things

Analytics will help insurance companies to overcome this challenge to transition from existing product and traditional distribution models to those that deliver what customers want. From social media to weather patterns, new sources of data and insights could help insurance companies to streamline costs, be more targeted with their risk management models, retain old customers and identify new ones, predict fraudulent activities or identify which claims have the potential to become very expensive.

This global growth in connectivity will be a blue ocean for Insurance Industries to tap in and Analytics will play a major role in deciding whether insurance players disrupt or get disrupted.

For example, driverless cars are no longer a futuristic idea and it is forecasted that there will be 10 Million driverless cars on the road by 2020.

Auto and Tech Majors, like, Mercedes, Tesla, BMW & Google are already investing heavily into bringing there self-driving cars on the road or atleast new range of safety gadgets installed in cars. For Insurance players, this will have a major impact, since Motor cover is one of major premium source – research shows that auto insurance accounts for more than 40% of the global insurance premium. Driver error is the biggest cause of accidents and hence the need (Tesla CEO Elon Musk assures his “self-driving technology to be at least twice as safe as cars driven by humans.”). With driverless cars increasing, the need for insurance for this segment will fall drastically. This will change the Insurance industry landscape but this will likely create more opportunities for Insurance players to get involved early in the technology, leverage new technologies like telematics and multiple data, apply analytics and open new avenues for revenue generation – Maybe insurance premiums in future will be calculated on malfunctioning of technology or vehicles and we should not forget that the Human Element cannot be completely taken off from the road.

One of the case study which caught my attention was presented by my fellow speaker, Ms. Aparajeeta Das, Co-Founder & Managing Partner, Third Eye CSS. She had an interesting vector on this topic which falls under the Agriculture Insurance space and how big data and analytics can help farmers and Save Crops. The 2 main challenges which Insurance companies need to tackle here is 1) Data availability 2) Quality of data, which points out that the government needs to play an important role in establishing robust policies, frameworks for collection of data and its usage. At the same time, the private sector should contribute with new technologies to be deployed in deriving actionable insights.  

The future of Insurance industry (or any industry) and their ability to remain competitive in the digital economy will depend on their ability to play on the equation “Big Data + Analytics” = “Business Transformation”

From being a product centric model to a customer centric one, the Insurance industry is set to go through a paradigm shift enabled by Big Data and Analytics – A world of limitless potential awaits the Insurance Industry.

About the Author
Kunal Thukral

Kunal Thukral is an evangelist with the Asia Analytics Alliance – A Special Interest Group of Asia Cloud Computing Association where his activities are aimed at advocacy, engagement with the entire ecosystem, and accelerating adoption of applied analytics across APAC. He is a firm believer in the values of KarmaSocial Capital and is also a part of the foundation team of the Social Capital Institute – an institution built with the mission of evangelizing the concept of ‘Social Capital’ and ‘KarmaSocial Capital’. 

Kunal also is a senior team member with TrustSphere, a young and fast growing Singapore HQed advanced Analytics business and his role entails leading some of the Global Strategic Initiatives, Market Development and Thought Leadership in establishing the category of Relationship Analytics with Industry visionaries, Renowned academics and Futurists across the globe.

Prior to his current roles, Kunal was leading Market Development and Strategic Marketing for emerging markets in Asia of a $6Bn+ Enterprise. Kunal is a regular speaker in the business technology circle in Asia and is passionate about technologies & business models that disrupt and transform how technology is consumed and leveraged by enterprises and individuals.

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