Earnix, a leading provider of integrated customer analytics solutions for financial services, and Verisk Insurance Solutions, a leading source of information about property/casualty insurance risk, released today the results of a joint industry survey: UK Modelling Data Acquisition and Usage Trends Survey.
today the results of a joint industry survey: UK Modelling Data Acquisition and Usage Trends Survey.
Verisk Insurance Solutions is a Verisk Analytics (VRSK) business.
Based on responses from UK carriers and brokers, the survey points to significant growth in the use of external data for modelling in personal lines insurance expected in the coming years. External data is defined as any data not acquired directly from the consumer. Some of the most commonly used sources of external data include consumer credit reports, driver records and traffic violation history used in auto insurance, and catastrophe models for floods and windstorms used in property insurance.
As many as half of the respondents anticipate the number of external data sources used by their companies will grow three to five times over the next three years, and an additional 35 percent believe they will double the number of external data sources over this period.
"Some of the emerging data types expected to see high growth in use over the next three years include social media data, building permit data, third-party telematics data, and shopping behaviour data," said David Cummings, senior vice president of Insurance Operations and Analytics at Verisk Insurance Solutions. "Insurers will add these sources to gain even more value in their pricing, risk selection, and fraud detection models."
At the same time, incorporating new data types into the different models is a major challenge that is expected to grow as additional data types are adopted. The majority of companies take more than three months to incorporate new data types into their models. As many as 48 percent of carriers require more than six months to make use of new data types in their underwriting models.
"To meet new competitive pressures over the next decade, insurers are called to use more data, efficiently generate insights from this data, and execute on it quickly. The survey shows that investment in data is expected to grow rapidly, with 75 percent of respondents planning at least to double their investment over the next three years," said Aviv Cohen, vice president of Products and Marketing at Earnix. "Despite these trends, insurers are struggling with the challenges of incorporating new types of data into their analytical models."
Here are additional key findings from the survey:
Sixty-five percent of insurance carriers regard the use of external data for modelling as a "must have" to keep up with the competition. Brokers are still somewhat behind in terms of the number of data sources used, but most of them view the use of external data as a competitive advantage.
The use of social media data is expected to grow at the highest pace over the next two years (182 percent growth). Other data types expected to grow rapidly over the next two years include vehicle telematics data (137 percent) and shopping behaviour data (108 percent).
Better pricing, risk selection, and fraud detection are the greatest benefits insurers are realizing by using third-party data. Product design and marketing are two areas where significant growth in the use of external data sources is expected over the next three years.