# The data-driven future of the insurance industry
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-03-14
Category: INSURANCE
Category URL: https://financedigest.com/category/insurance
Meta Title: Optimising Data Management Strategies in the Insurance
Meta Description: Discover how the insurance industry relies on emerging technologies like AI and IoT to drive efficiency and improve pricing. Learn more here.
URL: https://financedigest.com/the-data-driven-future-of-the-insurance-industryhtml

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_By_ **_Jean Sullivan,_** _vice president – insurance at Precisely_

Insurance is an industry that is powered by data. Insurers have heavily depended upon statistical analysis to assess risk and price policies long before the rise of personal computers, the internet, and the wealth of analytical tools available today.

With the industry [expecting more growth and profitability this year](https://www2.deloitte.com/us/en/insights/industry/financial-services/financial-services-industry-outlooks/insurance-industry-outlook.html), insurers are increasingly dependent on emerging technologies and data sources to drive efficiency. This expected growth creates reliance on robust [data management strategies](https://www.financedigest.com/investing-in-a-first-party-data-strategy-can-save-the-day-for-retailers.html "Investing in a first-party data strategy can save the day for retailers") to make optimal use of the information.

**_Difficulties with data management_**

The [insurance industry’s](https://www.financedigest.com/improving-risk-management-in-the-insurance-industry.html "Improving risk management in the insurance industry") dependence on data is complicated due to the challenges associated with the data-intensive process. Executives complain about having data that they cannot trust and access quickly. The lack of governance, structure, poor data quality, data silos, and lack of context prohibits decisive decision-making.

[Data integrity addresses these problems holistically by integrating disparate data sources and proactively managing data quality to ensure](https://www.financedigest.com/finance-firms-must-ensure-they-fix-data-fundamentals.html "Finance firms must ensure they fix data fundamentals") accuracy, consistency, and completeness, adding context through data enrichment and location intelligence as well as providing an overarching governance framework. The data can become useful across the many business processes to improve [profitability and reduce operation](https://www.financedigest.com/ikea-stores-owner-ingkas-annual-operating-profit-rises-9.html "IKEA stores owner Ingka’s annual operating profit rises 9%") costs.

**_Investment in AI is accelerating_**

Like many other industries, [insurers are increasingly investing in artificial intelligence](https://www.financedigest.com/how-artificial-intelligence-is-simplifying-sanctions-screening-for-insurers.html "How Artificial Intelligence is Simplifying Sanctions Screening for Insurers") (AI) and machine learning. These technologies are being utilised across many different applications, from [fraud detection](https://www.financedigest.com/the-clues-to-detecting-fraud-are-hidden-in-relationships.html "THE CLUES TO DETECTING FRAUD ARE HIDDEN IN RELATIONSHIPS"), improved pricing, and optimised claims management processes.

AI initiatives require [trusted data to create the machine learning models and it’s](https://www.financedigest.com/its-a-matter-of-trust.html "It’s a matter of trust") important to be able to access information from a variety of sources across the enterprise in addition to third-party data.

AI systems must also be designed to accommodate change. For example, lockdown [restrictions during the COVID-19 pandemic](https://www.financedigest.com/pandemic-restrictions-that-hampered-the-circulation-of-viruses-other-than-covid-19.html "Pandemic restrictions that hampered the circulation of viruses other than COVID-19") led to less traffic on the roads and fewer automobile accidents. Timely access to updated information ensures that AI [investments are positioned](https://www.financedigest.com/liverpools-new-chinatown-perfectly-positioned-for-property-investment-this-chinese-new-year.html "Liverpool’s New Chinatown perfectly positioned for property investment this Chinese New Year") to deliver the best results.

**_Employing IoT and_** [mobile devices](https://www.financedigest.com/emvco-streamlines-approval-process-for-mobile-payment-devices.html "EMVCo Streamlines Approval Process for Mobile Payment Devices")

Some [insurers are exploring the use of IoT sensors as a tool to better understand and price risk](https://www.financedigest.com/how-financial-services-insurance-leaders-can-get-more-scientific-on-risk.html "How Financial Services & Insurance leaders can get more scientific on risk"). Carriers can use telematic devices and mobile phones to gather [data about driving patterns, mileage, location, while other carriers accumulate data on actual usage time for insured](https://www.financedigest.com/should-insurers-buy-data-direct-from-their-customers.html "Should insurers buy data direct from their customers?") equipment. Machines that sit idle much of the day presumably [present lower risk](https://www.financedigest.com/why-insider-threat-presents-a-big-risk-to-financial-services-organisations.html "Why insider threat presents a big risk to financial services organisations") than those that are used frequently throughout the day. These new tools can increase [efficiency and improve pricing for carriers](https://www.financedigest.com/iforces-route-genie-to-drive-efficient-carrier-management-for-freestylextreme.html "IFORCE’S ROUTE GENIE TO DRIVE EFFICIENT CARRIER MANAGEMENT FOR FREESTYLEXTREME") based on actual usage.

As the use of IoT devices increases, and as new applications for mobile technology are developed, we expect to see significant expansion of machine-generated data used in the [insurance industry](https://www.financedigest.com/how-can-the-insurance-industry-avoid-having-a-kodak-moment.html "How can the insurance industry avoid having a ‘Kodak Moment?’"). With these larger volumes of data being collected, the [need to manage](https://www.financedigest.com/why-a-modern-organisation-needs-an-agile-approach-to-software-asset-management.html "Why a modern organisation needs an agile approach to software asset management") data effectively will grow.

**_Location, location, location_**

The [insurance industry](https://www.financedigest.com/nine-predictions-for-the-insurance-industry-in-2022.html "Nine predictions for the insurance industry in 2022") is leveraging the use of location intelligence, and this begins with, “where is this building or structure located?”. However, such a simple question can be difficult to answer accurately and consistently across the enterprise. The [need](https://www.financedigest.com/what-is-a-legal-entity-identifier-and-who-needs-one.html "What is a legal entity identifier and who needs one?") for hyper-accurate geocoding and a persistent and unique identifier serves as an important first step in the process of identifying the exact location. Then it is possible to layer enriched context to the location such as property attributes, points of interest, parcel boundaries, building information, dynamic weather, flood, and wildfire risk.

For insurers, an accurate and consistent geocode across the enterprise, with a persistent, unique identifier and enriched data allows carriers to understand the following: the [risk within the four walls of a building, adjacent risk, co-tenant risk, distance to coast, elevation, whether the property is in a flood zone, whether the property is in the path of a storm with the largest expected hail precipitation, and what the potential total risk exposure](https://www.financedigest.com/preventing-an-operationally-crippling-ransomware-attack-do-you-know-where-your-risk-exposure-lies.html "PREVENTING AN OPERATIONALLY CRIPPLING RANSOMWARE ATTACK –  DO YOU KNOW WHERE YOUR RISK EXPOSURE LIES?") is.

Similarly, wildfire risk is dependent on a property’s surroundings, taking in factors such as prevailing wind speed and direction, elevation, and proximity to combustible vegetation or other flammable material. Location [intelligence provides this kind of rich tapestry of information that can shed light on a property’s risk profile and allows carriers to price](https://www.financedigest.com/how-intelligent-is-your-pricing.html " How intelligent is your pricing?") accordingly.

**_Regulatory [compliance from good data](https://www.financedigest.com/data-virtualisation-the-secret-weapon-in-the-challenge-for-compliance.html "Data virtualisation: the secret weapon in the challenge for compliance") governance_**

Finally, the insurance [industry is impacted by regulatory pressure with respect to data](https://www.financedigest.com/theres-nothing-artificial-about-the-role-of-ai-and-data-in-the-finance-industry.html "There’s nothing artificial about the role of AI and data in the finance industry ") privacy, data sovereignty, and governance. The EU’s GDPR continues to evolve as [cases make their way through the courts](https://www.financedigest.com/belgian-court-decides-to-keep-eu-corruption-case-suspect-in-detention.html "Belgian court decides to keep EU corruption case suspect in detention"). Jurisdictions [around the globe](https://www.financedigest.com/pain-of-breaking-inflation-will-reverberate-around-the-globe.html "Pain of breaking inflation will reverberate around the globe") are considering similar legislation. [Insurance regulators are eager to understand](https://www.financedigest.com/understanding-asia-pacific-insurance-regulation-is-key-to-growth-says-aon.html "Understanding Asia Pacific insurance regulation is key to growth, says Aon") the risk models being applied by the companies they oversee. As the volume of [data being used by insurers](https://www.financedigest.com/aon-data-empowers-unica-to-offer-flood-insurance-for-5-2bn-canadian-peril.html "Aon data empowers Unica to offer flood insurance for .2bn Canadian peril") increases, regulatory scrutiny will continue to increase hence the need for a data integrity strategy.

As outlined, [insurers have access to large volumes of data but are struggling with quick access to trusted data for actionable insights that improve](https://www.financedigest.com/improving-online-visibility-for-insurers.html "IMPROVING ONLINE VISIBILITY FOR INSURERS") their decision-making processes. [Digital transformation](https://www.financedigest.com/redefining-the-human-touch-with-data-driven-digital-transformation.html "Redefining the human touch with data-driven digital transformation"), big data initiatives, and cloud-native analytics will complicate their usage hence the need for a data management strategy.

By focusing on the four pillars of data integrity – data integration, data quality and governance, location intelligence, and data enrichment, [insurance companies can optimise the capabilities of data](https://www.financedigest.com/big-data-lowers-insurance-premiums-and-optimises-business-performance.html "Big Data Lowers Insurance Premiums and Optimises Business Performance") in their risk assessments.


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