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Big Data set to transform life insurance
December 20, 2016 News big data Insurance Industry

 

Big Data could fundamentally transform the Australian life insurance industry by reducing the time it takes people to make a claim and creating more tailored and affordable products, according to a new report released by MLC Life Insurance today.

The Big Data in Life Insurance report, commissioned in conjunction with the Financial Services Council (FSC) and research firm EY Sweeney, provides an in-depth look into the opportunities and challenges for Big Data in the Australian life insurance sector.

Quicker claims processing, shorter policy application requirements and lower premiums are just a few of the benefits to customers outlined in the report.

Commenting on the findings, David Hackett, Chief Executive Officer, MLC Life Insurance, said, “Big Data presents a huge opportunity for life insurers and our customers, but it is clear we are lagging behind other sectors.

“There is enough evidence from other industries, such as healthcare and technology, to show customers are getting better service and products when more information is available. The same benefits could be realised for the life insurance industry.

“While there is still a lot we don’t know about Big Data, now is the time for our industry to invest in it to innovate practices where customer experience has perhaps been sub-optimal  in recent times, particularly around the processing of  claims,” said Hackett.

The report notes Big Data has the potential to provide benefits to customers and life insurers, including:
·       New perspectives: Access to more information about customers, including their purchasing habits and lifestyles will allow insurers to re-think how products are structured, and when they would be likely to buy life insurance.
·       Streamlining claims and administrative processes: Increased knowledge will mean less manual administration when making a claim, or even in updating policy details, meaning customers can get paid more quickly and have easier interactions with life insurance companies.
·       Improved understanding of risk: Life insurers will be able to gain a more complete picture of a customer’s situation, increasing the accuracy of risk assessments and pricing decisions.
·       Effectively predicting the likelihood of claims: More accurate pricing could make customers better off, particularly those shown to be less likely to make a claim. After time, Big Data should also reveal more accurately where the bulk of claims are coming from.

The report follows the launch of MLC On Track in 2015, a health and wellness program using wearable smartwatch technology to measure physical activity and reward customers with savings on premiums for improving their health.

David Hackett added, “We know Australians are looking for more than ‘set and forget’ life insurance. Whilst MLC On Track is still in its infancy, more than 17% of all new customers have signed up. Long term, we think that it can reinforce the value of life insurance on a daily basis, rather than just at the point of claim or when annual premiums are paid.”

But there will also be significant challenges such as the management and storage of data, adequate access to data and resistance within the industry for change.

“Many life insurers understand the need to embrace Big Data and technology to innovate, yet are unsure with how to incorporate them into their current business models.

“It is clear Big Data will assist in fundamentally improving the relationship between insurers and customers. It’s critically important for data specialists and industry decision-makers to collaborate to explore new and creative ways to leverage Big Data and technology within their businesses,” continued Hackett.

 Commenting on the report, Sally Loane, CEO of the Financial Services Council, said: “We are supportive of initiatives within life insurance that speed up the claims process, create products which are better suited to consumers’ needs and result in improved outcomes for people buying insurance. Big Data provides the opportunity to do all three.

“Life insurers have committed to the FSC’s new Code of Practice, designed to shorten claim times and improve outcomes for consumers. Big data has the potential to help insurers strengthen their relationships with customers while at the same time providing significant efficiency benefits for their businesses along the way,” said Loane.

This article was originally published on www.professionalplanner.com.au and can be viewed in full

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