The Data-Driven Revolution in Insurance

Having amassed over 25 years of experience in the financial services industry I’ve seen my fair amount of change. From the initial introduction of big data capabilities through to current efforts around digital transformation, machine learning, monetisation of APIs and IoT frameworks, the industry has constantly been disrupted by the introduction of new technologies which have driven efficiencies and productivity for insurers. And data is at the helm of the current disruption. It’s both the agent for change and the solution for insurance providers looking to stay relevant and competitive.

You’ve probably heard it before that ‘information is the oil of the 21st century, and analytics is the combustion engine’. We’re operating in a digital economy where data is more valuable than ever and in today’s connected world, insurers are sitting on a data goldmine. The challenge is, how does one turn that data into insight and action and use it to benefit customers which, in turn, helps the business flourish?

The constant improvement in data analytics, changing consumer behaviors, regulatory changes and new forms of competition have all played a part in shaking things up. Customer attitudes towards data have changed dramatically, to the extent that it’s now accepted that we allow access to our data in return for better deals and more content from brands. This shift will be crucial going forwards as organisations realise how to monetise the value of their data and increasingly look to “mine” more of it. I’m already working on some exciting projects in this space with insurance customers that use our modern platform for machine learning and analytics, optimised for the cloud.

Telematics: what you need to know

A prime example of changing expectations is when good driving behaviour results in a better deal on car insurance. Real-time monitoring is already commonplace in auto insurance, with telematics devices being installed in return for better rates – with these devices actually being proven to change driver behavior for the better.

Cloudera customer Octo Telematics has transformed how insurers assess risk, deliver crash and claim services, and manage customer relationships, powering its telematics IoT solution with Cloudera Enterprise. We’re helping them store, process and analyse data on more than 170 billion miles of driving and approximately 400,000 severe crashes from five million connected cars. In total, Octo Telematics adds over 11 billion new data points from connected cars daily to the platform, and insurers are beginning to take note of the telematic revolution.

One UK insurance company that we work with has reported a 30% reduction in the number of claims since introducing telematics. And another UK insurer worked with a large client to introduce telematics, which led to a 53% reduction in accident-causing risky driving manoeuvres.

So how does it work? By fitting a black box to a customer’s car, which constantly records information such as GPS location, driving speed, distance and time of drive, they can monitor rapid or smooth acceleration styles and braking and cornering habits.

The exciting result of all this is that insurers can now analyse this data to create a personalised record of each customer’s driving habits. By focusing on their individual characteristics and tendencies, insurers can more accurately predict the odds and cost of the customer filing a claim, and adjust rates and deductibles accordingly. Using this insight, someone who drives less responsibly can be charged a higher premium than a driver who drives smoothly and with less calculated risk of claim propensity.

But this is not only relevant for monitoring driving behavior, it is also relevant for identifying fraudulent or exaggerated claims. Take the example of a car accident where the vehicle involved has made a claim for whiplash? Telematics can provide crash reconstruction dossiers that can show, with a forensic level of detail, where the vehicle has been damaged as well as other factors such as the speed and angle of impact. From the reconstruction, it’s possible to conclude that vehicles were not travelling at sufficient speed to generate a whiplash injury claim. This means millions of motorists can now enjoy reduced car insurance premiums and responsible motorists will no longer have to bear this additional financial burden.

One thing is certain and that is the insurance industry of the future will look very different to what it is today. And this major change isn’t in the distance or on the horizon, it’s already happening. Insurers are already embracing data in innovative ways to help save lives, reduce accidents and fight fraud.

To find out more about the way Cloudera can help you power possibilities with machine learning and analytics in the insurance sector download our new Risk and Reward report.

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