Big Data Can Mean Big Insurance Savings

Featured article by Jeremy Sutter, Independent Technology Writer

The insurance industry has long been swimming in data. It has used data to come up with come up quotes and ratings. They’ve looked at local crime rates, age related accident details and even relationships between traffic tickets and claims. Before the era of big data, they were somewhat by what they could learn from the data they were using. Now insurance companies are harnessing the power of big data to provide personalized instant online insurance quotes that are a better match for customers than other companies in their area.

Big Data Tools

The growth of big data in the insurance industry has been ushered in with the growth of big data tools. First there has been an increase in the amount of computing power available, such as on-demand cloud based computing resources. Computing power has become more affordable and available whenever extra computing power is needed. Companies can crunch the numbers when they need it, even in real time, while keeping their costs affordable.

Another development has been the availability of big data software packages. There are several different methods to analyze data. The slide rules and graphing paper have been left behind and now tools like Hadoop, Excel, R Statistics, and other software packages are used to analyze big data. These tools have high availability. Hadoop is used in the on-demand data cloud for near real time analysis of data. Excel is used on the desktop to do basic data crunching and can be used present results from Hadoop. These tools are great for discovering relationships that are otherwise hidden in the data noise. They are also useful for making future predictions based on the data.

How Insurance Companies Use These Tools
Insurance companies have been quick to jump on the bandwagon and use these tools in their business. They have long been swimming in data and trying to make sense of it in order to provide the best possible insurance quote. Tools like Hadoop, Excel and R are revolutionizing the quest for better understanding of the data. Insurance companies use these for two big reasons, first for rating consumers and secondly for coming up with instant online quotes.

Insurance companies are using big data to combine all the information they have for a consumer to come up with a consumer risk rating. Whether the data is credit scores, addresses, relationships and any other data that can legally be used in a risk rating. With big data tools, real time ratings can be made taking into account all of these factors and more. It can comb through data to see red flags or positive flags and translate these into a quote. Instead of rating consumers based on broad classes, big data allows insurance companies to rate customers on a granular basis.

Quotes are another area insurance companies are using big data. They can quickly determine how other companies are charging similar customers and undercut them with quotes that are more cost competitive while keeping the quality and service high. Since they have more granular ratings, they can price their quotes at a rate that is cost competitive because their variance of risk in each class is now less. Moreover, even 10 years ago, quotes were far from instant. They might just pull rates from a generic database based on class, but now insurance companies can harness big data to provide instant quotes that are highly reflective of each customer’s needs and desires.

Benefits for Consumers

Information is power. The rise of big data means that there are many opportunities for consumers to benefit from this revolution. Without big data, consumers would be confined to rating classes based on their age, marital status and address. Now that they can be defined in smaller, more granular classes, consumer risk ratings more accurately reflect their actual risk to the insurance companies. These better ratings lead to better service and more beneficial online insurance quotes for consumers.

Insurance companies are still swimming in data. Their lifeblood is still data, but they are now harnessing the power of data to make better decisions. The information revolution called big data is already helping many consumers save money on their insurance, whether it’s auto insurance, home insurance, and even life insurance. Big data is already delivering big results.