Vast new data streams—from sources including government and third-party databases, comments and discussions on social media, and connected devices in the Internet of Things—create opportunities for insurers to identify and act upon the insights hidden within this sea of information, but they also open the door for new business models and competitors.
Although new competitors are emerging, most insurers have created a proven methodology for pricing risks and processing claims, along with acquiring a deep understanding of the specific industries or business segments they serve. This proprietary data, technical expertise and industry knowledge can be combined with new sources of external data to create deeper insight into risk factors and substantially improve loss ratios. Data-driven insights make it possible to create new products and new revenue streams, typically in partnership with players from outside the industry.
Harnessing external data is a complex undertaking, but insurers can start by developing a comprehensive plan and then undertaking specific, high-return initiatives that build momentum and help transform the enterprise into a winning competitor in the new digital arena.