Insurers have long leveraged third-party data providers to enhance and augment their data; more than 30 such vendors, both established and emerging, are covered in Novarica’s recent report External Data in Insurance: Overview and Prominent Providers. But a new category of data vendor is emerging. Rather than selling access to their own data, platform vendors are functioning as a data marketplace, matching smaller data providers with interested data consumers. These exchanges can serve as a structured place for smaller data sellers (or for companies where data is a secondary offering) to gather additional revenue without having to independently market their data. They can also help insurers (and other companies looking for additional data) find a new, wider variety of data sets.
A handful of companies operating data exchanges for the insurance industry have emerged. Narrative, Dawex, and data.world, for example, broker data between parties in a range of industries. Narrative, founded in 2016, offers turnkey solutions for data buyers to integrate new data into their organizations and for data sellers to monetize their existing data. Dawex, founded in 2015, offers turnkey solutions related to IOT data monetization, private data exchanges, and open data exchanges. Data.world, founded in 2015, is a data exchange where people and companies can share and view a broad range of data sets. Unlike the previous two, however, it’s an open model where participants are joining a free exchange of data.
The core purpose of these marketplaces is to make data available via free data exchange or via buying and selling. Data might be delivered through APIs and offered in a variety of formats, including raw, aggregated, and calculated. Because of the bazaar-style exchange of the marketplace, pricing will be dependent on both the vendor’s rules and the particular partner offering the data through the marketplace.
The growth of these marketplaces may impact how we exchange data, influencing both the quality and the price of the data itself. Marketplaces create a setting where buyers are given greater choice and can therefore be more selective about what they purchase. Providing buyers with greater choice can drive competition, promote high-quality data, and encourage fair pricing between sellers.
Without a marketplace, there is no standard format for smaller sources to provide their data or find customers. Data marketplaces may encourage standardization and reduce fragmentation in the third-party data industry. For data buyers, these turnkey marketplace solutions can serve as a consolidated place to get different types of third-party information and—depending on how standards evolve and are enforced—might eventually help insurers feel more comfortable with lesser known sources.
The lack of top-down management over specific data sets also means that there is no single actor responsible for the quality of the data in the marketplaces. This may affect the overall consistency and reliability of data. Insurers want to see a source of data has been tested and used across many years of loss history before relying on it to impact their own pricing and risk calculations, and data sets in an exchange will likely not pass that bar for many buyers.
It is still early days for data marketplaces; only time will tell how these platforms will impact the state of third-party data in the insurance industry. For more information on third-party data vendors, read the full report here.
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