October 18, 2018 Big Data: Insurance’s Secret Weapon

Big data is increasingly being used in the insurance industry as a way for carriers to assess and mitigate potential risk and claims.

October 16, 2018

By Burns Parker

The amount of data we produce every day is almost incomprehensible – 2.5 quintillion bytes. Written out, that’s a number with 17 zeros. Ninety percent of all data was created in the last two years, and the pace of data creation is only accelerating. The question is: How is all this data being used?

Data can be pulled from anything and everything: Amazon, Netflix, Instagram, Spotify, insurance claims, doctor’s bills, police reports, census reports, magazine subscriptions. You name it. Companies use this data to make inferences about almost every aspect of your life: your spending habits, what kind of music and entertainment you enjoy, potential medical complications, how safely you drive. The term “big data” refers to data that is too complex for traditional data processing techniques used by personal computers. Companies use huge servers, often based in the cloud, for data mining, statistical modeling and machine learning to analyze big data and pull helpful insights.

From an insurance standpoint, carriers pull insights about an insured company’s risks and potential claims through big data techniques. And, with the amount of big data skyrocketing, it’s no surprise this approach is becoming increasingly popular. A 2016 Towers Watson survey predicted 77 percent of insurers would use big data for pricing, underwriting and risk selection in 2018 compared to just 42 percent in 2016.

Using big data, carriers can discover a company’s biggest risks and mitigate them in order to lower insurance claims and keep employees safe.

Below are three areas that can be mined for trends:

Types of claims

If the same types of claims are filed repeatedly, that might be a sign that you need to freshen up your employees’ safety knowledge and schedule more training drills. For example, imagine your carrier is looking through your data and learns there have been 12 compensation claims from slips and falls at your company over the last three years, and seven of them have been falls from ladders. This shows that you need to reexamine your ladder safety protocol and schedule regular training sessions for employees that will better enable them to implement and abide by safe practices. If your employees are working in a warehouse, you may also want to examine whether the space is clean and tidy or whether spilled substances or junky surroundings are contributing to the accidents. This should lessen the number of slips and falls, and the correlating compensation claims that arise.

Frequency of claims

When you step back and look at the big picture view that big data provides, you might see a regular spike in certain claims during a particular part of the year. If you own a construction company, perhaps your carrier sees a rise in compensation claims filed during the summer months. This might mean improper heat training or provisions, which could indicate that you and your employees would benefit from increased heat safety training and preparation. That education will not only lead to less claims in the future, but improved health for your employees. A big data view allows for month-over-month or year-over-year trends to be discovered that may otherwise be overlooked or go unnoticed.

Severity of claims

Big data can also be used to help you pinpoint the causes of severe claims. The data may show that there has been a high number of severe claims related to a certain piece of machinery. You can then inspect the machinery to see if it is malfunctioning and needs to be repaired or replaced with new equipment. Routine machine training and inspections can also improve machine functionality and lower the number of severe claims filed by employees.

Analyzing big data allows you to see exactly where your weak points are and what changes you need to make in order to lower the number of compensation claims your company files. And it’s a win-win: increased safety for your employees and less claims, and possibly lower premiums, for you. Ensuring a safe and healthy workplace is your first responsibility, and big data provides a new approach for doing so.

Based in Birmingham, Alabama, Burns Parker is a vice president of Fisher Brown Bottrell Insurance, Inc., a wholly owned subsidiary of Trustmark National Bank. You can reach him at bparker@fbbins.com or 205-995-4606. Visit Fisher Brown Bottrell Insurance online at https://www.trustmark.com/fbbi.

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