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Big Data, Big Opportunities: How Insurers Can Innovate

By Kevin Miller, CIO, Missouri Employers Mutual

Kevin Miller, CIO, Missouri Employers Mutual

Insurance companies have always had access to volumes of data, but the ability for technology to process massive amounts of data faster provides more information about customers than ever before. With better access to third-party and sensor data, insurers can better understand different types of risks and help customers mitigate it.

"To derive insights, you first have to understand what problem you’re trying to solve"

What is big data? There is no universal definition. In fact, it’s become an often-misused buzzword that companies are applying to a wide variety of data. Technology firm Gartner defines big data as: “Big data is high volume, high velocity, and/or high variety information assets that require new forms of processing to enable enhanced decision making, insight discovery and process optimization.”

When the idea of big data was first introduced, everyone was claiming to do “big data.” What we were really seeing was people playing with Hadoop clusters and technology to explore what big data could do. Today we’re finally seeing the inflection point where what’s coming out of big data is creating business value.

Turn up the volume

Volume is key. To achieve “big data,” you need massive amounts of data to aggregate to try to understand correlations that were not possible previously. But the right data is more valuable than simply collecting more data to find those correlations and insights. The more data you have, the more insights are possible.

This is where the Internet of Things comes into play, adding data points about the industry. There’s a tremendous amount of innovation in terms of collecting data, using data, and even changing business models based on the insights derived from the data.

Take a chemical company, for example. If you have sensors that record how many times an employee goes into a high-risk area, what is the tipping point for the highest probability of getting hurt? Once you know that, you can reengineer the process to keep employees safe. This isn’t happening now, but it will as we stumble upon smarter insights.

To derive insights, you first have to understand what problem you’re trying to solve. What are the categories you’re looking for insights around? For the insurance industry, the largest opportunity is for underwriting and claims. Underwriting and claims are data-rich environments, and applying big data allows us to better explain the risks we write and price them better.

For example, in claims, analytics plays an important role in evaluating different variables that can predict when a claim will become more serious. This allows insurers to assign case managers earlier to get better patient outcomes and put employees back to work.

One of the most common on-the-job industries in the transportation industry is shoulder sprains due to the simple act of pulling the back door closed. Having better analytics to identify safety risks like this one allow us to innovate around solutions that prevent this occurrence. This technology exists; it’s just finding where to best apply it for a favorable price-benefit ratio.

Subrogation is another area that is data-rich. Much of this data is in unstructured field that can get lost. Analytic searches can find phrases that are indicative of a subrogation case and identify these opportunities earlier, maximizing loss recovery.

But who owns big data?

Today’s currency is speed. For maximum business value, organizations have to be able to identify opportunities quickly and take action. Velocity is possible with today’s technology, which enables the processing of massive amounts of data. Because the technology is so readily available today, many information officers are steering organizations in the wrong direction and pretending to make results with nothing but blinking lights in the business center. 

Organizations would be wise to steer clear of capital investments and instead rent the technology and bring their data to the party. People should be less enamored with the technology and focus on exploring hypotheses instead. There are so many cloud options out there that allow companies to be more agile to experiment, learn and fail. That’s when the real hypotheses are proven true and false.

Technology is becoming a bigger part of everything we do. The lines are blurring between what is information technology and what’s not. Organizations must stop thinking about who’s accountable and focus instead on what insights are going to drive business results.

The Chief Information Officer (CIO) should be a steward of technology for an organization, not a guardian as some people view the role. Data and technology will continue to drive the insurance industry going forward. As big data evolves, the role of the CIO is evolving with it. Gone are the days when a CIO was concerned mostly with IT infrastructure. Today’s CIO is expected to drive business and lead innovation.

With big data, innovation is possible like never before. More experimentation leads to more insights that can be applied within the organization to drive better outcomes. For an industry that works on the principle of risk, big data is transforming the insurance industry.

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