Big Data – The new Big Brother of the health and life insurance industry

If you were born in the 1970s or before, chances are that you now hold some form of health or life insurance to protect yourself and your loved ones against the banana skins that life occasionally throws into our paths.

Chances are also that, when you took out the policy, you were asked to fill in a form answering a number of health and lifestyle related questions and, the insurance company in question was required to simply trust that you were telling the truth……but all that is about to change!

Since the 1990s, the term Big Data has been used to describe the process of collating and analysing large sets of data in order to detect patterns and predict future outcomes and the insurance industry has not been backward in coming forward with utilising this highly effective tool.  With the advent of the internet, it has become more and more simple for companies to extract and collect data from customers and potential customers, using everything from online surveys to social media.  For some time, motor insurance companies have been using technology in order to monitor the driving behaviours of their customers and now, similar processes are being used in the health and life insurance industry.

In 2015, Apple released its Apple Watch which basically allows users to carry a powerful computer around with them…….on their wrist.  As well as allowing users to access the usual internet facilities, the Apple watch is also capable of gathering telemetry from the wearer and, it is this kind of wearable technology, along with gadgets such as the Fitbit, which insurers are looking to use in order to monitor the behaviours of their customers.  Some insurers are now offering discounts to customers who agree to wear a free Fitbit wearable monitor in order to keep track of the customer’s behaviour.  If this all sounds a bit Big Brother, consider the fact that, in a recent survey, 20% of customers admitted to being untruthful on their health insurance application, a figure that costs the insurance company – and which cost will often then be passed onto all customers in increased premiums.  Companies employing this new technology believe that using wearable technology will not only encourage customers to be more honest but will also have a positive effect on the customer, both in terms of them being more aware of their lifestyle and behaviours and in saving money on their insurance.  With some companies, customers can continue to receive further incentives and discounts by making improvements on their unhealthy behaviours, thus encouraging improvement in their health and their wallet!

Rather than simply referring to the size of the data set, Big Data consists of Volume, Variety, Velocity, Variability and Veracity and uses inductive statistics and concepts from non-linear system identification.  Predictive and statistical analytics are used to make sense of huge amounts of data.  This means that it can be collated and analysed in order to not just detect current patterns of cause and effect but also to predict how these patterns may evolve and change in the future.  For an industry like Insurance which works entirely on the principle of measuring risk, the use of Big Data is an invaluable tool to allow an insurance company to more accurately assess and predict risks and to therefore become more intuitive in issuing premiums.

Rather than an invasive way of ‘keeping an eye on’ their customers lifestyle and behaviours, insurance companies are looking to the use of tools such as Big Data as a way of creating a mutually beneficial partnership with the customer whereby both enjoy cost savings and an increasing number of insurance companies are investing in software and specialist staff in order to change the way they work their risk assessment strategies.