Data is a powerful (and valuable) asset for any insurer, and the industry is no exception has a long history of drawing upon third-party data providers to enhance underwriting decisions and marketing strategy.
The need for substantial data sources to supplement and augment internal processes is only growing, driven by the proliferation of predictive analytics, AI, and new consumer expectations for the buying experience. Insurers are also using data to reduce costs—whether for cheaper motor vehicle records or reducing in-person property inspections.
There are three main areas where insurers use third-party data: underwriting, marketing, and claims. Underwriting capabilities like predictive scoring and integrated data and analytics rely on third-party data. Insurers use demographic data to refine marketing efforts and data pre-fill for distribution. They leverage external data in product development and predictive scoring for underwriting and fraud, severity, and subrogation/alternative payer for claims. Some insurers are also using third-party data for data cleansing or validation.
It may come as a surprise, given the value and variety of third-party data use cases, how few insurers across lines of business rate their ability to leverage third-party data as mature. But carriers aren’t sitting on their hands. Third-party data maturity is still relatively rare, though growing—especially in the areas of predictive scoring and integrated data and analytics. Basic capabilities are becoming more widespread, and pilot activity is high.
Insurer interest has grown in AI/ML, which require large datasets for training. State and federal regulations, along with GDPR, are an additional driver, as they restrict what data organizations can use and for what purposes. Privacy concerns have made data use transparency critical at the same time. High-profile data scandals (e.g., Cambridge Analytica) have increased demand for insight into how and for what purpose organizations use data.
Third-party data vendors will become more critical to insurer operations as the importance of third-party data grows. It will become easier for insurers to integrate third-party data as they and vendors build support for APIs and true microservices into their architectures— lowering barriers to adoption and facilitating straight-through processing in personal and small commercial lines
See Novarica’s report—Third-Party Data in Insurance: Overview and Prominent Providers—for more insurer third-party data uses cases and profiles of 58 data providers that insurers use.
Add new comment