The incredible volume of digital information that is generated and catalogued on people all over the world and the advances in algorithms used to interpret this information is known as big data. The concept behind big data is that past statistics can help to more accurately predict future behavior. Big data in insurance is extremely useful by aiding insurance professionals with at least three things.
- Setting Premiums – Insurance professionals constantly have to balance their potential profit margins with their clients’ budgets when they issue an insurance policy. By using actual information about each individual seeking a policy to more precisely asses their risk level, insurance agents can offer more efficient rates.
- Identifying Fraud – According to the FBI, the average United States family has increased insurance premiums of between $400 and $700 per year because of fraudulent insurance claims. Using big data to profile current insurance claims against known fraudulent past cases can indicate which specific claims have a high probability of fraud.
- Marketing – The availability of big data allows the insurance industry to better understand their target market, enabling them to offer their clients products and services that more effectively meet their specific needs. The insurance industry can save time and money on advertising by pinpointing what is important to clients in their respective markets.
Insurance should be fair, objective and able to protect the policy holders while still making a profit for the insurance companies. Using big data in insurance can be beneficial for all parties involved.