The Impact of Big Data on the Future of Insurance

Key findings include:

• Through better understanding of the consumer’s behaviour and risk profile, insurers will be able to provide closely tailored and more accurately priced products. They will better identify risks that individual customers may be facing and use price signals to change their behaviour. However, the insurer’s responsibility to disclose risk information to the consumer is unclear and may prove contentious.
• Governments may have a role to play when competitive insurance markets do not deliver adequate cover at an affordable price for all, as is the case today for certain compulsory lines. This is especially so when the underlying risk is beyond the consumer’s control. A key issue is whether society wants individuals to pay a price for insurance that reflects their risk or should everyone have access to affordable insurance regardless of the risk? Policymakers will need to consider a balance between these two approaches, and one which will likely vary across different areas of the insurance market.
• Questions for policymakers will arise around privacy issues, who owns the information, what personal data might be used for and to whom it may be passed
• Improved risk pricing may also include “uncontrollable risks,” such as genetic make-up, where “the use of big data will raise unaffordability issues that cannot be mitigated by the individual modifying the risk”. These issues have society-wide and public policy implications.

Additional Media

• Big Data set to transform Australia’s insurance industry
  by Actuaries Institute. Published 17 November 2016
• Getting to know you - a paradigm shift in insurance
  by Stephanie Quine. Published 15 March 2017
• See What We See 2016 Video Series: