Big Data is just beginning to shake up the world of insurance, according to global reinsurance broker Aon Benfield.
These new massive streams of cheap, user-contributed content are characterized by volume, variety and velocity (real-time), Aon Benfield said in the latest edition of its Insurance Risk Study.
Insurance data, on the other hand, is not only sparse, it occurs at discrete intervals and is expensive to maintain. It is also “inhomogeneous,” with different values coded differently among different systems, making it hard to aggregate.
To integrate big data into these still waters usually requires combining databases with data sources, as well as the remapping, recoding, cleansing and normalizing of information. But the result can open the way for new products, coverages, pricing variables and risk management.
“Beyond property, there are exciting potential applications in agricultural insurance, logistic and exposure analysis,” the report said. “For example, is reported revenue consistent with parking lot usage?”
Ultimately, use of big data can create markets “more aligned with how customers want to buy protection” and enabling comparison shopping, for example, while stressing existing ones.
The data will use new sources of information, such as micro-satellites and personal-fitness devices. The resulting increase in knowledge of client behavior will facilitate risk management and even behavioral “nudges,” that in turn can lead to increased safety, the report said.
Finally, big data’s use by insurance companies will drive consolidation in the US industry, making it more like that in other countries, the report said.