18 December 2017
Blogs by author: Alexandra Foster, Head of Insurance, Finance, Payments & Post Trade at BT.
Is Big Data the next oil?
FinTechs and incumbents are mining the potential of Big Data and the IoT as never before. Specialised cloud solutions help them manage and analyse that data without compromising security.
Over the last 12 months, insurance investment in “insurtech” – insurance technology – companies has sky-rocketed.
In the first six months of 2017 alone, a staggering £218 million was invested into UK insurance start-ups, compared with just £7.8 million in the same period of the previous year. UK insurtech investment activity is said to have risen by 422 per cent in the first half of 2017.
Significantly, it is often the major incumbents which are recognising the enormous value that innovative technologies can bring to their businesses.
For insurers, one of the biggest areas of opportunity for incumbents and start-ups alike lies with harnessing Big Data – a commodity often referred to as “the next oil”.
Until recently, only devices such as computers, tablets and phones were able to connect to the internet. But now there are 8.4 billion internet-enabled smart devices that can communicate and interact with other machines, forming the Internet of Things (IoT) – and this figure is likely to grow to over 20 billion by 2020.
Used imaginatively, the data collected and analysed through IoT can facilitate a better understanding of a customer’s risk profile, smarter marketing, and more accurate pricing. This is already transforming the way insurers do business with their policyholders. And many companies are now using the data they collect to create personalised multi-media marketing campaigns, tailored products, bespoke pricing and a more efficient claims process.
The data is being used by insurers to predict undesirable outcomes, which has in turn reduced risk and premium costs for policyholders as well as cementing a relationship based on mutual benefit. One such example is the use of black boxes, or telematics in cars that monitor how safely the user drives, and enables insurers to reward good driving with lower premiums or discounts.
Data collected by drones can also help decrease losses and obtain compensation in the wake of natural disasters. In the case of Hurricane Irma, for example, digital images collected by drones could facilitate faster loss assessments and claim processing. This data can also play a part in predicting the areas that would be most heavily impacted, so reducing risk in the industry.
Insurers have a huge burden of responsibility to ensure that, once they have gained the consent of their customers to use the bank of ‘big data’ gathered from the IoT, it will be protected, stored and managed safely, securely and confidentially.
The industry has taken steps to build trust in this regard by recently publishing a customer guide “How Data Makes Insurance Work Better for You”. Within it, the Association of British Insurers sets out the case for change, outlining some of the expected benefits customers will see in return for agreeing to use their data.
Specialised cloud solutions
So how can insurers manage and analyse the huge amount of data the IoT generates, while exploiting the flexibility of on-demand services, without compromising security?
One of the answers is a specialised cloud solution that combines public, private and hybrid services into one single cloud that insurance companies can manage centrally. This can provide the insurance community with a highly secure ecosystem that connects thousands of applications and services with users worldwide. This helps to build security into the entire cloud environment, permitting employees and customers to connect securely from any location and device to any service and enabling financial and insurance companies to fully capitalise on the benefits that the IoT has to offer.
This “Cloud of Clouds” approach allows large organisations around the world to connect easily and securely to the data centres, applications and data they need, independently of where they are hosted. Employing it allows the CIO to have a consolidated view of all different clouds the organisation is using, and eliminates insecure services, or improves them by employing appropriate security measures.
Centralising control like this also helps build security into the entire cloud environment, permitting employees and customers to connect securely from any location and device to any service.
You can read the full version of this article on Finextra’s blog.