How can Big Data drive the future of insurance?
How can Big Data drive the future of insurance?
Technology and innovation are having great impacts on the transforming Vietnamese insurance industry and Big Data brings further opportunities and challenges.
More insurance businesses are now planning to apply new technologies in their management systems and improve customer services, while many also plan to develop new products to meet market demand as well as diversify insurance sales channels, according to a survey released by Vietnam Report in June last year.
In particular, 82.4 per cent of insurance companies said they were building a Mobile Internet development strategy and 64.7 per cent have adopted strategies based on two key factors in Industry 4.0: the Internet of Things (IoT) and Big Data.
Disruptive technology
Big Data provides new insights from social networks, telematics sensors, and other new information channels. As a result, it allows understanding customer preferences better, enabling new business approaches, product development, and enhancing existing internal models, processes, and services.
The rise of Big Data could give way to a fundamental change in the insurance industry, including the entire value chain, starting from underwriting to claims management.
The Internet of Things (IoT), drones, social media, mobile technology, and connected devices have drastically increased the data insurers can leverage across the value chain.
Leveraging data to improve underwriting and product development will drive revenue and profitability by speeding entry into profitable niches. Sensor technology is a major contributor to Big Data and will profoundly change the insurance industry.
Telematics and other connected devices record driving patterns and can change customer behaviours. In-home and building sensors monitor environmental conditions and can revolutionise pricing and claims.
The recent “Vietnam Actuarial Conference 2018” held by Prudential Vietnam – one of the leading life insurers in the country – last month discussed how Big Data would bring both opportunities and challenges to the insurance industry.
“Big Data is a new topic for insurance companies in Vietnam,” said Phung Ngoc Khanh, commissioner, Insurance Supervisory and Authority, Ministry of Finance. “From the perspective of the regulator, this is the ‘turning point’ to promote the insurance industry by the utilisation of new technology.”
Talking about the application of technology in the insurance industry, Clive Baker, CEO of Prudential Vietnam, said, “Prudential is always ready to take the lead and to be a pioneer in technology innovation, which has been helping us to connect with customers more closely and provide them with greater control over their journey with Prudential.”
“The use of Big Data is aligned to this direction. We identify Big Data as an opportunity to better listen to and understand our customers, thereby providing the best possible financial and health protection solutions.”
"This means we can offer our customers better designed products with the most economical premiums, while still ensuring effective operation and financial safety for the company,” he added.
Opportunities and challenges facing actuaries
Big Data also opens the horizons and a lot of new possibilities for actuaries. The applications of Big Data go far beyond insurance activities and relate to various domains where the statistical analysis and the economic/financial implications are essential.
Data science and actuarial science do mutually reinforce each other. More data allow for a richer basis for actuarial mathematical analysis, Big Data leads to a dynamic risk management approach. The application of Big Data goes far beyond insurance activity. With these possibilities from Big Data, it also requires actuaries to master the new changes to best utilise them.
Moreover, Big Data not only brings challenges but also opportunities for actuaries to ‘transform’ themselves to be well-prepared for the digital age.
Data science is also discussed as a new focus for actuarial career development. With combination between actuarial and data-science skills, actuaries can perform statistical computations and data analyses not only by cohort but also by individual policy.
Actuarial analysts who are comprehensively knowledgeable about insurance enterprises’ business will find more opportunities for Big Data applications to optimise business through product development, underwriting, claim processing, and customer experience.
Meanwhile, the “Vietnam’s Life Insurance Industry – Digitalisation Trends” report released last year by the research, consulting, and education firm Fintelekt found that life insurance companies in the country are still in the early stages of digital adoption and are contemplating a planned and cautious approach to digitalisation.
The digital age presents many insurance companies with opportunities for further growth, cost reductions, and product differentiation, but modernisation challenges remain.
Specifically, when one person’s health data is integrated and accurately calculated, financial protection solutions are also designed accordingly with special offers for each individual.
Big Data helps insurance companies to approach and understand customers more easily as well as provide customers with solutions to actively prevent risks and balance their lives. The data source is vast and ever increasing, and the big challenge is how to structure and organise it into useful information.
The world’s leading insurance corporations have been implementing advanced technologies and platforms which are readily available in big markets, according to Vuong Gia Vu, the Appointed Actuary at Prudential Vietnam.
According to Vu, there are still certain barriers to the application of technologies in Vietnam, including limited access to information and potential constraints around the regulatory framework.
“However, I think that these will be gradually resolved in the medium to long term. Applications and analyses of Big Data will be the key elements for insurance firms to better understand their customers and to successfully implement and execute their customer-centric strategies in the future,” Vu said.
