Data Science For Insurance Companies: Beneficial Approaches
As we mentioned in the first article of this series [Data Science For Insurance Companies], Data Science brings some valuable benefits to different areas across insurance sector. Let’s describe these beneficial approaches in more details.
Personalized Risk Pricing
Data Science combines different analytic applications, like behavioral models based on customer profile data with a continuous set of real-time data, such as satellites data, weather forecasting reports,
vehicle sensors, etc. to create detailed personalized assessment of risk.
Life and Health Insurance
To create profiles of customer health and develop individual scores, insurers are now collecting the following information with the help of Data Science:
- food purchasing “history”
- personal body sensors (to predict possible illness)
- data from workout machines
- social media information related to health and its changes
Health insurers are particularly interested in what hospital data sets have to tell them. Humana, for instance, is using claims data to discover which customers are most at risk of ending up in the hospital with preventable complaints (and claims). This gives them the means to intervene before the event occurs.
In order to create usage-based home insurance, Data Science uses telemetrics to facilitate risk assessment for insurance companies. This may include the following data sources:
- moisture sensors that detect flooding or leaks
- utility and appliance usage records
- security cameras, occupancy sensors
Furthermore, this information can be combined with data from outside sources (e.g., local crime reports and traffic) to receive a multi-faceted, comprehensive assessment of one person’s property claim risk. Even more, Data Science in conjunction with predictive analytics may generate predictive data reports to protect a customer. For example, insurers can calculate the likelihood of a theft or a hurricane and take steps to avoid pain, as well as big claims.
Modern automobiles have built-in safety electronic systems that transmit real-time telemetrics and driving data via wireless channels. This information is very useful for insurance companies in terms of creating the most detailed reports of drivers and their cars. In addition, there are two more ways of improvements: PAYD: Pay-As-You-Drive and PHYD: Pay-How-You-Drive.
The first approach charges customers based on the number of miles or kilometers driven, whereas the second one also tracks driving factors and also driver’s habits: speed, acceleration, cornering, braking, lane changing, fuel consumption, geo-location, date and time. So, if an accident occurs, the insurance company has the ability to recreate the situation in details minute by minute.
360-degree Customer Profile
To improve customers satisfaction, and keep them happy, insurance companies are combining all their direct customer connections – e.g. email, call center, adjuster reports, etc. – with indirect sources – e.g. social media, blog comments, website and click-stream data – to create a 360-degree profile of each individual.
The bad news is that such implementations usually involve an additional layer to the complex existing information system. The good news is that some organizations have made this challenge an opportunity to make their Information System more relevant to address new businesses goals.