Insurance – How Big Data and Data Science are Driving the Revolution

The next big growth sector for data scientists is InsurTech, with Forbes highlighting that almost 20% of all data science and analytics (DSA) job demand is in Finance and Insurance. The insurance market represents a huge opportunity for disruption: many of its practices are outdated; it is digitally behind the curve; hugely data-rich; and worth approximately €3.5 Trillion.

Disrupting the Insurance Market

Though the insurance industry has not always been quick to pick up on new technology, there are signs that change is starting to happen. PWC reported recently that investment in InsurTech by global insurers, reinsurers and Venture Capital firms surged by 247%.

“The entire industry is focused on how life was lived five or 10 years ago,”

– Andrew Brem, Chief Digital Officer at Aviva.

Brands like Aviva are investing in tech startups in the same way that the banks did five years ago. Axa is putting more than €3bn into IT and digital developments, billions more are going into InsurTech start-ups, which are aiming to challenge the big players. The likes of So-sure, Friendsurance, Lemonade, Guevara, Brolly and a host of others are aiming to disrupt insurance in the same way that Uber, Airbnb, Netflix and Spotify have caused upheaval in other industries. According to CB Insights, $1.7bn went into insurance start-ups last year,

“With our unique mix of insurance, tech and data science expertise, we are rethinking the insurance business model from scratch. We put the customer first in all that we do, while building up cutting-edge proprietary technology.”

Andrew Shaw – CEO Coya

Data Science Leads the Disruption

So how is data science involved? Everywhere! The key technological drivers of Insurtech disruption – Big Data; IoT; driverless cars, event pricing, risk assessment – mean that data science is the engine driving the revolution. A recent piece of research by risk management firm Aon – The Global Insurance Market Opportunities Report –  highlights the wealth of opportunities that InsurTech can offer the insurance industry. The report confirmed that the insurance industry has three prime areas for growth – Cyber risk, casualty catastrophe risk, and pathogen risk – and that data science and analytics will help in the development of these areas, making them assessable for risk and therefore far more insurable through InsurTech innovation.

Speaking about the future of the industry and greater collaborations with InsurTech companies, Paul Mang, the global CEO of Analytics at Aon explained:

“We are already using technology to make us more efficient as a sector, and to expand into emerging risk markets. However, the true transformation will happen as we re-imagine risk management altogether. In this new environment, collaborations, or what we call open architecture innovation, will be key to creating net new growth.”

Greater Consumer Focus

At a consumer level, we’ve all experienced the frustrations insurance purchase – car insurance, travel insurance, credit card insurance to name a few. Buying insurance is still time-consuming and many customers see the task as arduous. Aviva’s chief digital officer, Andrew Brem, explained to that;

“Buying insurance is ridiculously retrograde, with endless questions resulting in a quote. We’ll be moving to a world where those questions are basically unnecessary. With the use of big data, we are discovering interesting and accurate predictors of risk that do not involve asking people questions.”

Effectively, with greater data science involvement, individual customers of an insurance company will no longer necessarily be offered prices that are given to the same, or very similar, customers. Instead, more personalised and bespoke pricing will be offered and this will reflect a truer risk to the insurer.

This pricing revolution will also have a significant impact on what we buy or how we are covered by our insurance:

 “Imagine that mobile phone signals or other sensors detect that a person is about to walk down a road where several people have recently fallen on ice, he says. The insurer will react by either sending a message warning the person to walk more carefully or else automatically increase the premium and cover while the policyholder is walking down that road”.

– Scott Walchek, CEO & Founder of (insurtech start-up) Trōv

The Future of Insurance

In order to improve their ability to enhance risk assessment practices, some insurance firms are already engaging with data science businesses. Pioneering telematics firm, The Floow, has confirmed their financial backing from two of the world’s largest insurance suppliers, including Direct Line. The investment by The Floow into the insurance market serves to combat commonplace insurance market problems through acknowledging the need for the industry to embrace the digital age and create engaging digital customer experiences.

The actions of Floow echo the actions of many other tech firms who see data science as the key to revolutionising the insurance sector, improving risk assessment and pricing, and enhancing customer experience through innovation.

To find out how data science can help your business, get in touch with us today.

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