A key benefit of using big data for insurers is that it can provide actionable insights from the information being collected from consumers. Insurers can create tailored policies based on the lifestyle of each consumer using personalised data. Big data, however, can be a disadvantage to consumers who have a smaller or no data footprint as they may be unfairly profiled.
Listed below are the key macroeconomic trends impacting the big data in insurance theme, as identified by GlobalData.
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Consumer focus on data security and trust
Modern consumers are far more aware of their data footprint. Historically, financial services providers might be selected exclusively for perceived level of trust managing money, but perceived level of trust managing data has taken on added importance in recent years.
The Facebook-Cambridge Analytica debacle was the first major example of how quickly trust can be eroded in the event of a misstep. Facebook’s virtual currency, Libra, collapsed primarily due to lack of trust. Subsequent banktech company combinations have gone to great lengths to make it clear what is stored where and how, and for what purposes it is analysed and by whom.
Growing consumer backlash against black box discrimination
Customers can benefit from more accurate risk assessment, for example, via cheaper premiums. Customers, however, can also be unfairly priced out of markets or otherwise excluded by the black box algorithms that drive decision-making.
Customers with little or no digital footprint could become “invisible” to applications that rely on data to profile people and assess risk. Similarly, customers might be unfairly profiled due to their spending or shopping habits being similar to someone else’s that has been refused credit in the past.
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By GlobalDataWillingness to share data in exchange for benefits
Most customers are only willing to share private data with insurers when they receive guarantees of certain levels of savings. Our 2020 UK Insurance Consumer Survey found that 9.3% of consumers would be interested in a usage-based insurance (UBI) product if it saved them 10%, which increased to 18.7% for 20% savings and 38.3% for 30% savings.
Younger generations are more comfortable sharing personal data in areas such as health and driving. As awareness of cheaper premiums continues to increase this trend will continue to grow.
Covid-19
The global pandemic will have significant knock-on effects in terms of macroeconomic trends around the world. The most relevant one for the big data industry is likely to be the desire for more personalised policies, if they save money for the customer.
Job losses are set to mount in 2021 and personal finances will be squeezed. The biggest blockage for companies attempting to utilise big data has been privacy concerns, but the trade-off of cheaper policies for giving access to personal data is likely to be more appealing to many in the aftermath of the pandemic.
This is an edited extract from the Big Data in Insurance – Thematic Research report produced by GlobalData Thematic Research.
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