Insurers’ appreciation for orthogonal data

Orthogonal data

It is anticipated that within the next three years, on average every human being on the planet will create about 1.7 megabytes of new information every second. This includes 40,000 Google searches every second, 31 million Facebook messages every minute, and over 400,000 hours of new YouTube videos every day.

At first glance, the importance of this data may not be obvious. But for the insurance industry, tapping into this and other kinds of orthogonal (statistically independent) data is key to finding new ways to create value.

A clearer picture of individual risk

By paying closer attention to the data people create as part of their everyday lives, insurance companies can better anticipate needs, personalize offers, tailor customer experience and streamline claims. Using a wider variety of information is especially useful in better understanding and managing individual risks. For instance, behavior data from sensors, shared through an opt-in customer engagement program, provides insurers with the insight needed to initially assess and price the risk, and mitigate or even prevent subsequent losses.

Take, for example, the use of telematics data from sensors embedded in cars and smartphones. When shared, the raw telemetry data provides insurers with insight into an individual’s actual driving behaviors and patterns. Insurers can reward lower-risk drivers with discounts or rebates while providing education and real-time feedback to help improve the risk profile of higher-risk drivers. Geofencing and other location-based services can further enhance day-to-day customer engagement. In the event of an accident, that same sensor data can be used to initiate an automated FNOL (first notice of loss), initially assess vehicle damage, and digitally recreate and visualize events before, during and after the crash.

Using individual driver behavior to monitor and manage risk is just one way to leverage orthogonal data in insurance. Ultimately, new behavioral and lifestyle data sources have the potential to transform every aspect of the insurance value chain. Forward-looking insurers will tap into these emerging data sources to drive product innovation, deepen customer engagement, improve safety and well-being and even prevent insured losses. For those who invest in the platforms and tools needed to harness the value of orthogonal data, the advantages will be significant.

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