Big Data is transforming the business world. With access to unprecedented amounts of information on consumer behavior, companies have almost limitless possibilities for refining products and services.
This is certainly true for the insurance industry. As a very people-centric industry, insurance companies have many ways to refine their business practices using Big Data. Here are six examples of how insurance companies can use Big Data to their advantage.
1. Stop insurance fraud
Since the inception of insurance, fraud has been one of the biggest risks of selling policies to the general public. According to the FBI, the cost of insurance fraud is over $40 billion a year.
Big Data can be used as a new strategy to combat fraudsters who want to game insurance companies. Using complex analytics software, companies can now better parse the data they have to find patterns that indicate potential fraud. For example, many software applications have features that automatically detect anomalies in the data. Although such outliers from normal patterns may have other explanations, this certainly makes it easier to identify and investigate possible fraud situations.
2. Implement applications employees already use
One great thing about Big Data is that analytics tools are designed to be easy to use with traditional office software. For example, Hadoop, a Big Data processing application from Apache, is designed to work with Excel so that reporting in Hadoop can be performed with just a few clicks. This allows any insurance professionals to quickly access mountains of data for the information they need and export it into a form they already know and use.
3. Make insurance cheaper
Competition in the insurance industry is heating up, as evidenced by Google’s recent introduction of a car insurance comparison tool for California residents. While the tool has a ways to go to compete with other online insurance comparison tools, similar services will almost certainly be available nationwide soon.
However, the insurance industry does not need to suffer the negative effects of a price war. Big Data can help insurers find ways to offer consumers lower prices while maintaining the bottom line. If insurance companies can use Big Data to better predict which individuals are least likely to file a claim, for example, they can focus on attracting more of these customers. Collecting consumer information from social media and other sources can produce data that can be analyzed to predict which consumers are most likely to file claims.
4. Improve the health of customers
Big Data also has great applications in the healthcare industry. Efficient collection of data on people’s medical histories can improve the quality of the healthcare they receive and help them lead longer, healthier lives. This in turn directly benefits healthcare insurance providers: healthier policy holders means fewer claims, which results in lower costs, higher profits, and cheaper insurance.
Insurance companies can take direct advantage of this through wearable technology, devices and apps that track a person’s fitness and health. An insurance company, for example, could use this technology to provide incentives for customers to exercise and live healthier lifestyles.
5. Better track customer preferences
Like any industry, insurance is constantly evolving. Companies that fail to keep up with change risk lower profit margins and losing market share to competitors. Big Data can certainly be used to gain greater insight into the preferences and behavior of consumers.
Social media provides a particularly rich source of data, with information that’s accessible almost in real time. This enables insurers to create smarter marketing campaigns, adapt more quickly to consumer feedback, and create new products based on consumer preferences.
6. Create more precise coverage
Lastly, the ability to instantly access and parse relevant information can help insurers provide customer service that is tailored to each individual policy holder. According to one Orange County personal injury attorney, for example, compensation for pain and suffering, emotional distress, or loss of companionship is rarely offered under insurance coverage without a lawsuit. Hundreds of thousands of dollars are lost every year due to insurance companies inadequately tailoring their customers’ coverage. Through analytics software, customer support employees will have quicker access to more exhaustive information on individual customers, thus creating a more precise picture of customer needs.
The software can even make suggestions based on the data on how to best support individual customers, which will lead to higher customer satisfaction rates, stronger customer loyalty, and better word-of-mouth for the brand, both online and off.
For more best practices for service industries in today’s increasingly data-driven business environment, see How to Avoid the Risks and Challenges in Creating Services for Products.