5 ways Data Analytics is a Game Changer for the Insurance Industry

We are in the age of ‘Big Data’ and while it is becoming a big business in the emerging technological world, let us understand and get a deeper insight on what Data Analysis basically is.

Data Analysis is a process through which we intensively inspect, transform, and model unstructured data, reducing it to a structured form. This is done with the intent of discovering useful information, drawing conclusions, and supporting decision making. Ballooned by the growing number of devices, IDC Data Age predicts that by 2025, the total amount of digital data created worldwide will rise to 163 zettabytes.

While touching various industrial verticals with its advantages, Data Analytics is playing its part in the Insurance industry too. Insurance data analysis is the way to effectively gauge your financial situation to get an idea of how much risk, if any, you are able to undertake as a business and how much of it should be transferred to an insurance company. Hence, a complete Insurance data Analysis will ensure that you have all the greater risks covered to your best capabilities.

Now that we have an understanding of Data Analytics and its role in the insurance industry, following are the top 5 ways in which the former is a game-changer for the Insurance verticals.

Top 5 ways in which Data Analytics is a Game Changer for Insurance Industry

1. Preventing Fraud
Since well-sophisticated data analytic tools have been introduced in the insurance industry, the rate of fraud detection cases has climbed enormously. It is important that these cases be detected as fraudulent insurance claims cause the premium cost of an insurance company to escalate as they have to pay for these claims.

Big data analytics helps insurers to identify whether an applicant is likely to make a fraudulent claim by studying its past behaviors and identifying whether an applicant has any past convictions for fraud. Social media analytics also plays a vital role in gauging whether a potential policyholder might engage in fraud. Such ways of predictive modeling help the insurance agents to determine whether they should seek additional information about the applicant or to deny issuing a policy completely.

In a similar way, detecting instances of fraud, companies can use data analytics to process claims before hefty payouts are made. The claim data can be trawled through to check whether there is any pattern of the events leading to the claim. For example, a claimant happens to report a car theft after leaving its windows open. This claim would definitely be flagged for further investigation.

2. Potential Risk Assessment
Carrying out detailed risk assessments is one of the major uses of data analytics in the Insurance sector. Big data analysis is used to identify how much of a risk each applicant is representing before issuing them a policy. Thanks to the data analytic tools, the insurance industry holds various data sources like police crime records and social media information.

Let us take an example of a person having no prior criminal records, deciding to take an insurance policy for his/her new car. This case would undergo various risk assessment checks based on the make of the car, the customer’s existing records, and the age.

With the developed big data analysis, now we have access to far more information. Hence, factors like the crime rate in the area where the applicant is living, the number of instances their make of car is involved in accidents, etc. can also be taken into consideration. Hence, before issuing a policy, intensive risk assessment is undertaken, and the policy is priced in accordance with this assessment.

3. Streamlining Internal Insurance Activities

Large sums of money in the insurance industry has been saved by data analysis through its ability to streamline the internal insurance-related processes. Assessing customer feedback, checking how well any particular policy is selling, customer’s response to various sale techniques and promotions and gauging which policies receive the most number of claims are some situations where data analytics is put into play and delivers impeccable results for the insurers.

As an enormous amount of data can be processed within a blink of an eye, data analytics makes it easier for the managers to examine which particular areas in their company are doing well and which ones need improvement. This allows them to train their human resources better to sell products and also helps them to refine these products according to the statistical requirements.

4. Customized Policy Offerings

Insurance industries have now become more and more customer-centric and provide customized policy offerings. Customers, these days, believe in getting a trusted consultant who can help them get the insurance policy, which is best suited according to their requirements. Data analytic algorithms help the insurers and consultants to retain customer loyalty by predicting customized plans suited for each individual customer.

Intelligent management platforms in data analytics allow the insurers to get a 360-degree overview of each applicant’s portfolio and also help them to offer the customers actionable insights based on previous insured customer data.

5. Handling Subrogation Cases

Opportunities of subrogation often get lost breathing under large volumes of data, which is mostly, police records, medical records, and adjuster notes. If identified correctly, these cases can save the insurance companies large sums of money by reducing loss expenses. Data text analytics trawls through this unstructured data and finds out the phrases that indicate a subrogation case.


Everything said, we are sure that Data Analytics is taking the insurance industry forward, and we will keep seeing a positive change in the future to come. Data analytics-driven organizations, whether insurance firms or companies providing insurance BPO Services, are 23 times more likely to acquire customers, six times as likely to retain customers, and 19 times as likely to be profitable as a result, says McKinsey Global Institute. With the mentioned stats, it can be concluded that data analytics is helping the insurance industry in client retention and providing better services. Big data analytics is a powerful tool which is making the insurance industry reach new heights.

Fuente: Diana Krall


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