Optimisation And Transformation Of Insurance Data

Historically, insurers have always been data-centric and dependent on spotting risks in large volumes of information. While earlier they were dependent on their own organisation’s retained customer data and consumer-stated information at point of quote, data from claims management applications, billing systems and administration solutions among others; today they are becoming more dependent on data available from public records and contributory data sources. 

This data transformation is just beginning. A lot more data is being collected and could be accessed real-time. The need of the hour is to integrate data from these new sources with traditional data sources to form a cohesive ecosystem that provides value to the insurer, while bringing transparency to the customer about what data is being collected, for what purpose and how.

According to insights from Fitch Ratings, more insurers are looking to build market share by making the best use of big data. Those companies that fail to keep pace will see themselves increasingly marginalised, or pressured to consolidate. The huge potential of the data – with the challenges related to processing, integrating and seamless use – has helped to leave the door ajar for disruptors, or technology specialists and data aggregators, working in the service of insurers.

With bigger and newer data sets available, the insurance industry in India faces a major challenge for data collection and optimisation. Let’s walk through some of these challenges and the way forward.

Challenges related to data collection and integration

There are a lot of challenges related to data collection and integration but let’s focus on the few important ones here:

• Lack of seamless access to public data records

One of the fundamental challenges for insurers operating in the country is seamless access to public records, including valuable data sources like birth/death registry, driving licence and motor vehicle records. Making these records more accessible and affordable will significantly help in fraud control.

• Operations in an environment of legacy applications

This is one of the structural challenges plaguing the insurance industry where companies are operating in an environment of legacy applications (mostly from acquisitions made over years). This is supported by siloed and multiple databases which aren’t integrated with each other. 

As a solution to these types of data gaps, contributory databases, where multiple insurers contribute data collected from various sources, would not only improve the quality of data, but also help save insurers from losses due to incorrect data (either due to fraud, manual data errors, or wrong information provided by the insured).

While insurers today have numerous data sources available, there is very little business benefit from raw data if they can’t gain any useful insight or predictive power out of it.

• Issues related to data ownership

The question regarding data ownership is another challenge faced by insurers. While consumers on their part feel their information is their own data and they have the right to decide with whom they want to share it, insurance companies on the other hand have a legitimate right to use that data, to fulfill the insurance contract, and this data forms the crux of their operations. 

• Evolution of the regulatory framework

While the evolving regulatory framework aims to address various important issues pertaining to consumer protection, continuous changes have also led to high costs of compliance and data collection costs. We can note here that many insurers have had to revamp their product portfolio since 2010, bringing out newer versions of existing products to remain compliant with changing regulations. This has led to an increase in chances of errors in the collection and integrity of data.

The way forward

As insurers are looking to leverage and collect data in the future to enhance operations, boost transparency and elevate customer service, there are some issues which need to be immediately addressed. Some of these are:

• Data security

It is known from many research sources that cyber criminals will primarily target the financial services sector in the months and years to come. Any data breach due to a cyber attack may have long-term repercussions on the insurance industry in terms of reputation, reliability and revenues, subsequently making it more difficult for insurers to collect data.

Thus, insurers need to remain innovative, whilst also implementing robust data security measures into their operations to ensure that data remains protected from cyber criminals. 

• Digitisation and centralised storage of data

It is essential for insurers to obtain as much customer-specific information as possible. Digitisation among Indian insurers is still at a nascent stage and there’s a lot of catching up underway at the current time. 

A report from the Confederation of Indian Industry (CII) and PWC concludes that insurers need to strategically adopt the necessary technology infrastructure to drive products that are more responsive to the customers’ needs. Insurtech and the technology trends are already better understood. Now is the time for insurers to move towards these new horizons with renewed focus.

The author is Senior Director, Technology - India, LexisNexis Risk Solutions