They say big data is here to stay and yet, globally, many organisations have no clue what it means or how to use it. Like confidence, big data can mean different things to different people. In the Complete Beginner’s Guide to Big Data in 2017, industry analyst Bernhard Marr writes: “In 2017, we generate data whenever we go online, when we carry our GPS-equipped smartphones, when we talk to our friends through social media and when we shop. You could describe it as leaving digital footprints with everything that involves a digital transaction – which is almost everything.”
Your unique footprint (read: data about you) can be quite useful to the hundreds of thousands of businesses looking to grow their profitability and indeed quite a number of businesses have started zeroing in on this strategy. But legacy issues at a number of established South African firms do bring a degree of complexity to the question of ‘how’.
In a 2016 McKinsey &Company interview with senior leaders across the world, it was found that businesses are still trying to wrap their heads around the many conundrums big data can present. Ash Gupta, the president of global credit risk and information management at American Express admitted that the company has a lot of data but that they weren’t using it effectively. “…we weren’t paying as much attention to the data quality as we now need to. That was to make sure that the data has the right lineage and the right permissible purpose to serve customers.”
In the insurance industry, inefficiencies in any system can cost consumers millions of rands a year. Bradley Smith, a specialist consultant at digital agency Platinum Seed, says South Africa’s insurance industry still operates under an “archaic system” where distribution still seems relatively broker-centred with corresponding incentive structures. While the Financial Services Board has done quite a bit to change this, Smith argues that local insurance marketing remains “…industrial with a blanket approach rather than a highly targeted and personalised one.” Smith says local insurance products are still very generic and not tailored to individual needs and back-end administration systems are still outdated because “they’ve been built in layers over time.”
But the tide seems to be turning. Globally, mobile phone and technology companies have already made their foray into the insurance market. Telefonica SA’s O2 unit — one of the first mobile operators in Britain to offer car insurance – has just expanded its product line to include telematics boxes, which track people’s driving habits and can lead to cheaper premiums for younger people. Analysts Rebecca Penty and Oliver Suess predict: “There’s stoking speculation that a wave of fintech companies will push into the market and disrupt the way insurers interact with customers.”
So what opportunities does big data present to established insurance businesses? For starters, we know clients don’t want a hassle and a very accurate litmus test of a good insurance company is their claims process. This is the reason people buy insurance in the first place; so that insurers can pay out their claim. Using big data to provide a customer with a smooth claims process (imagine a scenario where a house break-in or car-prang alerts an insurer who then contacts a client before they contact them) will immediately set a business apart. Similarly insurers need to start using big data to set policy premiums. In the motor insurance category, the use of big data to monitor driving behaviour (and reward clients) seems to have taken off with some degree of success, as is the case with Discovery Insure, for example.
There’s very little doubt that it’s a very exciting time for insurers and indeed, the entire concept of innovation. The Financial Times reports that globally, most property and casualty insurance executives expect to use big data (and the analysis thereof) to help them with pricing, underwriting and risk selection”. The data itself may be derived from the ‘smart home’ (which is where a number of household devices like cell phones and air-conditioning could produce enough data to help price a risk and thereby set a premium, for example).
But using big data is only going to be effective if companies analyse the right sets of data to inform a new client experience journey. The work required to get this exactly right has led to some speculation that a range of insurance industry joint ventures may be on the cards.