Robert Gothan, CEO and founder of business process management specialist Accountagility, argues that instead of concerning themselves about missing out on the Big Data bandwagon, insurers should concentrate on maximising their ‘little data’ in order to gain the most valuable insight. In Gothan’s view, big is not always beautiful in terms of data quality.
Big Data has been a hot topic over the past couple of years, with new technology and innovative concepts – such as the Internet of Things – allowing information about customers, behaviour and geo-locations to be collected and analysed on a large-scale basis. However, many businesses still don’t really understand what Big Data is all about, and how – or indeed if – it can bring benefits to their organisation.
It all boils down to the definition of ‘Big Data’. Insurance firms are currently dealing with the implementation of Solvency II and struggling to manage the vast amounts of data it includes. The careful management and analysis it requires is already pushing the boundaries for insurers, and includes nothing like the amount of information held by Big Data.
Unlocking little data
Big Data, by definition, is so large that it cannot be held by normal databases, or calibrated using desktop programs such as Excel. As a result, very few firms actually have access to true Big Data, and should therefore start by looking at the information sitting right under their noses – little data.
Insurance is a transaction-based industry, and with firms often having millions of rows of data, the priority is the quality and how well-defined this data is, rather than the quantity.
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This includes accurate integration, meaning that all information is integrated correctly from transactions by the commercial side of the business into the finance function.
Insurers should also make sure that all data is traceable, with the ability to locate particular numbers and the process that calculated them.
As such, instead of concerning themselves about missing out on the Big Data bandwagon, insurers should concentrate on accuracy and maximising their little data in order to gain the most valuable insight.
Accountagility’s recent research showed that over the past year, 80% of the CFOs surveyed reported a fault when using spreadsheets. With this lack of efficiency, businesses should concentrate on correcting errors in their little data to ensure that their basic procedures, such as month end and financial reporting, are effective before they begin monitoring larger trends.
Big benefits for life insurance?
In order to identify how best to use their data, firms need to start by highlighting the key business objectives they would like to solve.
Previously agreed goals can often serve as a strong roadmap for the identification of relevant data sourcing, which will generate new insights for evidence-based decision making by executive team members.
For some insurers, this process may well involve Big Data, especially in an area like telematics, which uses devices in cars to track driving behaviours and then calculate insurance premiums accordingly.
Life insurance also could benefit from Big Data by using it to monitor an individual’s health. For example, customers may be asked to use ‘wearable technology’, such as a fitness wristband, to track their heart rate so that firms can calculate a premium based on the results.
Working alongside little data, Big Data can also be useful in acquiring new market knowledge and making competitor comparisons, which provides instant business insights that can be used to make internal amendments to strategy, reporting, sales and technological processes.
Tracking these trends and using them in combination can help companies to see the broader picture, with the smaller, more comprehensible data sets providing actionable insights that can be more easily aligned with, and reflected in, daily activity.
The growth of the Internet of Things signifies that large-scale insights are set to flourish, offering more ways for businesses to collect and use important data.
As such, companies should focus on fine-tuning existing analytics and efficiently completing important tasks using little data before they become distracted by ‘bigger and better’ tools.
If businesses do choose to invest in Big Data, however, it is a prerequisite that the little data feeding into it is able to produce accurate results.
At this stage, firms must be able to use the results of Big Data to feed directly into their business processes to gain market insight, and later, competitive advantage.
Big is not always beautiful in terms of data quality, so businesses must trust that their investments really will be useful, and not present a headache for users trying to incorporate results into existing business knowledge or other improvements.
The good news is that there are sophisticated processes which can be employed to collect and report on this information automatically, separating the opportunity from the challenge.
Through automated technology, insurers will be able to manage and maximise new insights to increase their efficiency, gain valuable information with little ongoing effort, and ultimately achieve smoother processes with better business results.