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Big Data for Insurance

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Big Data for Insurance 1

By Alex Gayduk, Founder & CEO of InsurTech development company Fortifier

The insurance industry has always been quite conservative; however, the adoption of new technologies is not just a modern trend but a necessity to maintain the competitive pace. In the modern digital era, Big Data technologies help to process vast amounts of information, increase workflow efficiency, and reduce operational costs. Learn more about the benefits of Big Data for insurance from our material.

How Big Data is Revolutionizing Business

Modern society is continuously producing impressive amounts of real-time data. Processed by artificial intelligence, it becomes a valuable source of information vital for most business models, including insurance.

Big Data is mainly used for:

  • New distribution models – virtual assistants, robo-advisers, and chatbots enhance customer interactions and make marketing more targeted;
  • Process automation – it substitutes manual labor and improves the efficiency of the internal workflow;
  • New propositions – it enables creating alternative business models such as peer-to-peer concepts or digital insurers.

Big Data and Insurance: Implications for Innovation and Competition

Insurance was always based on data analysis: accident statistics, policyholder’s personal information, as well as third-party sources help to group people into different risk categories, prevent fraud losses, and optimize expenses. The rapid movement towards the Digital Society opens new sources of information that can be used to create a complex behavioral pattern for each particular customer and precisely determine his or her risk class.

There are two new data sources:

  • Online behavior – this includes social media activity, online shopping behavior, browsing activity, etc.;
  • Sensor data – from devices in the Internet of Things such as drones, Smart homes, cars.

Such personal data can complement the traditional sources used in insurance, generating real-time insights about a person’s lifestyle and habits that can be used for competitive advantage.

The Role of Big Data in the Insurance Industry

As Anna Maria D’Hulster, Secretary General at The Geneva Association, suggests,“Going forward, access to data and the ability to derive new risk-related insights from it will be a key factor for competitiveness in the insurance industry. New approaches to encourage prudent behavior can be envisaged through Big Data, thus new technologies allow the role of insurance to evolve from pure risk protection towards risk prediction and prevention.”

Let’s take a closer look at several Big Data solutions for insurance.

Customer Acquisition

Every person generates massive amounts of data via social networks, emails, and feedback, which gives much more precise information about their preferences than any questionnaire or survey. Analyzing such unstructured data, insurance companies can increase their efficiency by creating targeted marketing companies that will help to acquire new customers.

Customer Retention

Based on customer activity, algorithms can identify early signs of customers’ dissatisfaction so you can quickly react and improve your services. Using gathered insights, insurers can focus on solving client’s issues, offer discounts, and even change the pricing model to increase the loyalty of each particular customer.

Risk Assessment

Insurers were always focused on the verification of customers’ information while assessing the risks, and Big Data technologies can increase the efficiency of this process. Before the final decision, an insurance company can use predictive modeling to estimate possible issues based on the client’s data and precisely determine their risk class.

Fraud Prevention and Detection

According to Coalition Against Insurance Fraud, each year US insurance companies lose more than $80 billion due to fraud, and this results in increased premiums for every stakeholder. Using predictive modeling, insurers can compare a person’s data against past fraudulent profiles and identify cases that require more investigation.

Cost Reductions

Big Data technology can automate many manual processes, making them more efficient and reducing the costs spent on handling claims and administration. In a competitive environment, this will result in lower premiums, which will attract new clients.

Personalized Services and Pricing

The analysis of unstructured data can help to offer services that will meet the customer’s needs. For example, life insurance based on Big Data can become more personalized by taking into account not only the customer’s medical history but also habits detected by activity trackers. It can be also used for determining pricing models that will both ensure profit for companies and fit customers’ budgets.

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Effects on Internal Processes

The implementation of big data algorithms can enhance the efficiency of most processes that require a lot of analyzation. Technology can help insurers quickly check the policyholder’s history, automate claims processing, and deliver better services to customers. According to McKinsley, automation can save 43% of the time for insurance employees, so they can focus on money-generating tasks.

How is the Market Evolving by Segments?

The insurance industry has already started benefitting from Big Data application; however, the situation is slightly different for each particular sphere.

Big Data in Health and Life Insurance

Involving new data sources, the industry can develop new insurance models that will not only be more targeted but will also encourage consumers to improve their lifestyle by offering discounts for higher activity. John Hancock has already announced switching to interactive policies based on data generated by fitness trackers and health apps.

But the implication of Big Data in health insurance causes concerns related to data security, privacy, and ethics. This field still requires legislation to ensure that penalizing unhealthy behavior doesn’t harm those who really need protection.

Big Data in P&C Insurance

The situation is more promising for property and casualty insurance, as Big Data can help to detect empirical links between customer behavior and risks. For example, car insurance companies can grade roads based on the reported accidents and check their clients’ tracks. With Big Data, car insurance can get a highly personalized customer profile based on drivers’ GPS locational data and use it to make the final decision. As GPS data is encrypted, such a process doesn’t breach clients’ privacy.

Big Data for Insurance 2

travel

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Big Data in Travel Insurance

Compared to other segments, travel insurance adopts big data and AI technologies particularly well. The relatively low policy price makes travel insurance a fairly quick decision, so this industry deals with an impressive number of requests. Technologies can speed up the interaction with customers, give more tailored products and services, automate simple communication, improve customer satisfaction, and quickly configure the most beneficial offer.

What Will the Market Size Be in the Next 3 Years?

The adoption of Big Data is constantly increasing, and insurance companies are expected to invest in these technologies up to $3.6 billion by 2021, according to SNS Telecom&IT. Big Data implementation results in 30% better access to insurance services, 40-70% cost savings, and 60% higher fraud detection rates, which is beneficial for both insurers and stakeholders. The combination of Big Data and insurance will facilitate the adoption of on-demand models and new underinsured risks, for example, cybercrime.

Big Data for Insurance 3

fortifier

Predictive Modeling and Big Data Are Insurance Industry Powerhouses

The continuous analysis of consumer data makes it possible to understand customer behavior and gather real-time insights for both established insurance enterprises and InsurTech startups. Using Big Data analytics, insurance can offer personalized policies, precisely assess risks, prevent fraudulent activities, and increase the efficiency of internal processes.

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Why brands harnessing the power of digital are winning in this evolving business landscape

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Why brands harnessing the power of digital are winning in this evolving business landscape 4

By Justin Pike, Founder and Chairman, MYPINPAD

Delivery of intuitive, secure, personalised, and frictionless user experiences has long been table stakes in digital commerce, well before the era of COVID-19. As businesses harness the revolutionary power of digital technologies, they have pursued large-scale change to adapt to evolving consumer preferences (some more successfully than others, but that’s a blog for another day). Digital transformation is a term we hear repeatedly, and it looks different for each organisation, but essentially, it’s about utilising technology and data to digitise, automate, innovate and improve processes and the customer experience across the entire business.

As I said, this was already well underway but then came 2020 and no industry escaped the disruption of the coronavirus outbreak, which has had an indelible impact on businesses performance, operations, and revenue. Regardless of whether the impact of COVID has been very positive or very challenging, it has forced organisations globally to re-evaluate and re-orient strategies to adapt.

As lockdowns and pandemic-related restrictions continue to change daily life, this raises the question of how we can balance a dramatic shift to digital and the benefits it brings, while ensuring business continuity and innovation both during and post-COVID, and protecting everyone against fraud?

Digital is an essential survival tool, and even more so in a COVID world

No one could have predicted the dramatic digital pivot that has taken place over this year. Indeed, within weeks of the COVID outbreak cash usage in the UK dropped by around 50%. Digital solutions including delivery applications, contactless payments, mobile commerce, online and mobile banking have become essential components of a touchless customer experience in the era of social distancing. It’s no longer just about an enhanced and superior customer experience, it’s also about health, safety and survival.

In store, businesses have benefited from contactless payments enabling faster throughput and reduced need for consumers to touch payment terminals (therefore requiring greater cleaning, which degrades the hardware much faster). Mastercard reported a 40% increase in contactless payments – including tap-to-pay and mobile pay – during the first quarter of the year as the global pandemic worsened. Digital has also become an essential sales channel for many B2C brands. Where brick and mortar stores have been required to close, digital commerce enables continuity of customer relationships and revenue. This channel also provides brands with rich customer data, which can be used to enhance and personalise the customer experience and typically results in greater levels of engagement and uplifts in revenue.

Industry forecasts estimate that worldwide spending on the technologies and services enabling digital transformation will reach GBP 1.8 trillion in 2023 – a clear indication that the process represents a long-term investment and a global commitment to digital-first strategy. The key point here is that digital brings significant benefits, and regardless of COVID, is here to stay.

The challenges that rapid digital transformation brings to businesses

Justin Pike

Justin Pike

Regardless of whether businesses are operating in developed or less-developed economies, these times of crisis have levelled the playing field in the sense that all businesses are facing similar issues. Access to products and supplies, maintaining customer relationships, accelerating sales for some and declining sales for others, health and hygiene are just a few of the unique challenges brought about by COVID.

Many businesses in physical environments have had to swiftly implement changes to significantly reduce safety risks for staff and customers, such as contactless payments, mobile ordering and delivery options. But with these changes come a host of other benefits of digitisation, such as faster transactions, and reduced human error at the point-of-sale.

The reliance on technology, however, can also expose organisations and consumers to certain vulnerabilities. In particular, the risks of fraud and cybercrime have dramatically increased since the onset of the pandemic as scammers have taken advantage of digital technologies to target both businesses and individuals.

As a McKinsey report illustrates, new levels of sophistication in the activities of fraudsters have placed more pressure on companies that have been previously slow to go digital, bringing “into sharp relief how vulnerable companies really are”, and damaging the financial health of small and large businesses. In fact, the Bottomline 2020 Business Payments Barometer reveals that only one in 10 small businesses across the UK report recovering more than 50% of losses due to fraud.

But take these stats with a grain of salt. While it is important to be aware of the risks and challenges this new business landscape brings, it’s equally as important to have a lens firmly across your own business, industry and audience, and to identify the changes you can make internally to mitigate risk as well as improve your customer experience. Where can you make some quick wins? Do you have the right skillsets internally to achieve what you need to achieve? What technology is out there that will enable your business goals? There are tech companies like MYPINPAD that are making huge strides in software development, which will transform businesses globally.

A digital world post-COVID

Almost a year in, the line between business success and failure remains fragile. However, an ongoing transition towards greater digitisation will be the difference between survival and the alternative.

There is a wide range of initiatives businesses can implement to weather this storm. If we look at the space MYPINPAD operates within, secure digital consumer authentication is crucial to the ongoing success and security of not only financial products but also identification and verification across a range of different industry verticals. Shifting the authentication of consumers securely onto mobile devices enables businesses to completely reshape their customer experiences. By bringing together a more seamless, frictionless customer experience, accessibility, privacy, security and access to consumer data, businesses are able to drive digital transformation across day-to-day activities.

Against this backdrop, software with stronger security standards continue to play an ever more vital role in supporting society, protecting consumers and businesses from the increase in risks that rapid digitisation brings. Already, merchants can deploy PIN on Mobile technology from companies like MYPINPAD, onto their smart devices to speed up the digitisation process many are now tackling.

Essentially, opening up universal payments and authentication methods that feel familiar, for both online and face-to-face transactions, will be key to opening up a world of possibilities when it comes to redefining how businesses engage with consumers.

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Brexit responsible for food supply problems in Northern Ireland, Ireland says

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Brexit responsible for food supply problems in Northern Ireland, Ireland says 5

LONDON (Reuters) – Food supply problems in Northern Ireland are due to Brexit because there are now a certain amount of checks on goods going between Britain and Northern Ireland, Irish Foreign Minister Simon Coveney said.

British ministers have sought to play down the disruption of Brexit in recent days.

“The supermarket shelves were full before Christmas and there are some issues now in terms of supply chains and so that’s clearly a Brexit issue,” Coveney told ITV.

The Northern Irish protocol means there are “a certain amount of checks on goods coming from GB into Northern Ireland and that involves some disruption,” he said.

(Reporting by Guy Faulconbridge; Editing by Tom Hogue)

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2021: a new tipping point for digital commerce

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2021: a new tipping point for digital commerce 6

By Damien Perillat, SVP Digital Commerce at Worldline Global

2020 was a year of significant change for all of us, impacting businesses and their customers heavily.  While several industries struggled, the demand for digital commerce and alternative ways to pay took off as nation-wide lockdowns meant customers needed to shop from the safety of their homes. This forced many businesses that previously relied on their bricks and mortar stores into the online space. And now, consumers are increasingly comfortable with ecommerce being a crucial part of their shopping experience – even those who were previously reluctant to adopt a digital life. It took ecommerce 20 years to reach about 15% penetration of consumer spending and in just a few months we jumped five to ten years forward. This isn’t likely to change in 2021.

Even in physical stores, customers are looking for safer alternatives to cash and chip-and-PIN payments. UK Finance revealed that contactless spending was up 18% across the UK in September last year when compared to the same time in 2019 – 64 percent of debit card transactions and 46 percent of credit card transactions were contactless. The use of digital and contactless payment methods will be much more widespread in 2021 as we enter this new normal.

K-shaped economic recovery will continue

With that said, economic recovery won’t take place at the same rate for everyone. Different industries have been impacted in their own unique ways by the pandemic. Leisure and travel continue are ranked as the most one missed activities by consumers and the first signs of recovery will be in the form of an increase in domestic and regional travel.

At the same time, the way consumers are interacting with different industries has changed. For example, millennials are looking for more experiential holidays with strong social aspects, where they can make a positive impact on the destination and people they are visiting. And, younger generations are displaying more conscious buying behaviour, focusing on sustainability.

Other industries have faced difficulties throughout the pandemic. Challenged with economic uncertainty, customers have cut back on spending on non-essential, luxury items, instead favouring spending that has enabled low-touch and home-based activities, such as food delivery, electronics, home entertainment and online marketplaces.

A shift in payment preferences

What has been uniform across many industries though, is that consumers now have high expectations surrounding not only the user experience (UX) but also the payment process itself. They anticipate an easy shopping experience where payments are almost invisible. Having the right payments mix will therefore be the key ingredient for success this year for many. Companies will need to ensure that their payment processes are fast, simple and frictionless as online checkout experiences have been raised to the next level.

At the same time, demand for digital goods and services surged last year as people were stuck indoors during lockdowns so purely digital players benefitted. By the end of Q3 2020, Netflix had a huge 195 million subscribers registered, while from February to June, Zoom saw a 677% increase in usage – attributed to increased remote working.

Clearly the digital transformation boosted the subscription economy, and that didn’t stop at just digital goods. People took to subscription services that regularly delivered anything from food to supplies to their doorsteps. This has been a much safer and convenient way to purchase goods during the pandemic.

So, with subscription services establishing a foothold last year, 2021 will be the time for businesses to invest in understanding the dynamics of what a truly optimised subscription payment customer acquisition looks like.

More online payments means more online fraud

Last year it wasn’t all plain sailing for everyone operating in the digital space. The increase in online payments presented more opportunity for fraud to take place and that’s exactly what happened. Between May and July 2020, when certain lockdown measures were eased and customers became more willing to spend, fraud volumes rose 61%, according to figures published by Barclays Bank.

Damien Perillat

Damien Perillat

Similarly, chargebacks became more prevalent. When shops are more reliant on deliveries than ever before, there is more opportunity for things to go wrong with orders and customers to be dissatisfied with what has been purchased. Fraudulent chargebacks have also become much easier to commit as it is increasingly difficult to prove when deliveries arrive safely.

Therefore, in 2021, not only will it be important to have a frictionless UX, but security measures must be effective without impeding on checkout processes and refund management will remain critical.

Going global

Greater risk of fraud didn’t stop businesses from embracing their new-found digital capacities while physical stores were closed though. Many have ventured into international territory with the aim sharing their services with other countries around the world.

This year, focusing on high-growth markets such as India, Brazil, Russia, and China will be hugely beneficial for companies looking to operate internationally and we could see cross-border sales continuing to take off in these regions. South-East Asia and Latin America have some of the greatest potential for digital commerce growth and I would urge those operating across borders to consider offering services there.

Key to achieving this is the ability to provide payments services that meet the needs of customers in different localities. Worldline research has found up to 42% of customers are likely to drop off and search for an alternative website if their preferred payment method is not offered at the checkout. Therefore, businesses must integrate with payment networks in different regions to provide locally relevant payment methods.

Yet, the web of complexity is increasing for online merchants, especially for those that want to expand internationally. As such, next year we can expect to see the growing popularity of payment solutions that seamlessly support the international reach of consumers and that enable businesses to integrate with local payment networks, while minimizing the need for local establishments and resources.

In a similar fashion, supply and logistics is becoming more localized. Lockdown measures hugely impacted supply chains around the globe and businesses resorted to new sourcing strategies and business models which will continue to be used this year.

Facing up to the change

2021 will be another extraordinary year for many businesses, as the world begins to find its feet again following COVID-19. Businesses must assess their position in the market and ability to meet the changing needs of customers’ when it comes to preferred commerce and payment methods.

Not only will this be critical when operating in the bustling online space, but it gives them scope to diversify, bringing in new revenue streams as we face the current economic downturn. When used to their full potential, payments will also ensure that companies can continue expanding online and abroad, even if the economy is going through a long K-shaped recovery period.

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