January 22, 2020
4 minute read
It’s hard to think of a commercial sector better placed to benefit from big data insight than insurance. The entire concept of insurance is based on assessing the likelihood of various occurrences, so it makes perfect sense that more data and ways in which to analyse it would result in more accurate risk assessment.
There is a wider pool of consumer data for insurance companies to draw on than ever before – open data, social media data, data from devices connected to the Internet of Things (IoT) – such as connected cars. All of this can be merged and collated to paint a more detailed picture of the individuals and organisations applying for insurance who, in return for allowing access to this data, receive personalised and ultimately more competitive premiums.
This rapidly growing data-led area of the insurance market even has a name; Insurtech. The application of big data to the insurance industry is enabling new start-ups to disrupt the traditional insurance policy model, which has remained largely unchanged for decades. As Accenture report, “86% of insurers believe innovation must happen at an increasingly rapid pace to retain a competitive edge” – there’s certainly much to be learned from the way many new Insurtech companies are using big data to offer ‘on-demand’ cover in real time.
We don’t all use our cars every day, or even every week or month, but traditional annual car insurance policies cover every day of a year regardless, even for vehicles sat mostly in garages or parked off-road. What if we could choose to pay to insure our cars only when we’re actually using them?
That’s the thinking behind a new type of vehicle insurance from UK start-up Cuvva, which provides fully comprehensive cover for just months, days, weeks or even hours at a time, for car sharing or test driving for example. Cuvva takes the usual driver details, and then ‘enriches’ that information with multiple other datasets about the car they’re looking to insure, their local area and their driver’s licence. Policies can be set up in minutes via the app, verified by selfies and scanned IDs, and cancelled or extended anytime with just a few clicks.
Insurtech is enabling new types of insurance product that fit more readily to the changeability and fast pace of modern life. Homeshare insurance is another example of this; insurance that’s specifically designed to cover AirB&B properties, and only when they’re being used by guests. For example, hosts can turn Slice homeshare insurance on and off as they like so as to make their policy as cost-effective as possible.
Slice uses AI and machine learning to crunch data from a range of sources, including social media, geospatial data and even weather forecasting, to provide almost instant quotes for short-term homeshare insurance. The developers behind Slice have also launched a cloud-based usage model to enable third parties to offer on-demand-style insurance products based on their digital platform. This side of the pond, long-established insurance group Legal & General have become the first UK-based insurer to use Slice’s Insurance Cloud Services (ICS), with plans to enter the homeshare insurance market here.
Back to our motors though. Customising vehicle insurance isn’t just about the time we spend behind the wheel; some insurtech insurers are offering policies based on the distance we drive instead. In the same way that Cuvva targets drivers who only use their cars sporadically, UK start-up By Miles offers cheaper insurance to those who travel less than 7,000 miles a year.
The company provides customers with a telematic ‘miles tracker’ device, which records the number of miles they cover in their vehicle and feeds this data back to By Miles, who then use it to calculate a unique and accurate monthly mileage insurance cost. A fixed annual insurance policy covers the car the rest of the time, such as when it’s parked. Drivers can see exactly how much they are charged per journey on the By Miles app, as well as other useful features, such as MOT reminders and warning diagnostics.
Insurtech businesses have used data to revolutionise the long-established insurance model, instead offering agile, adaptable policies that flex to meet modern life. As Tom Chamberlain, underwriting manager for general aviation and aerospace at Allianz Global Corporate & Specialty SE says, “We no longer need to make assumptions at the start of the year on how a customer is behaving, we can use big data to assess the risk on the spot at any time or place cover is needed.”
In the same way, big data analytics can reveal how your business could be taking a more flexible marketing approach, communicating with consumers across their preferred channels as these change and shift. Big data can enable your business not just to predict how your customers will respond to your products and services, but to adapt and react as this changes in real time.