This latest Opinion piece is by Tamir Roter, VP, Luminati Networks and looks at how data continues to transform every part of the insurance process.
As far back as ancient Greece, insurers have looked to all the available forms of data to calculate risk. Ancient money lenders would examine the time of year, the number of clouds in the sky, or the entrails of a sacrificed pig in their attempts to read the future and calculate the risk of losing a ship to storms or pirates. Luckily, things have moved on significantly since then. Companies are now looking more and more at data collected from non-traditional sources like social media (and more) to determine the credit worthiness of modern companies. Though online data such as the number of employees listed on LinkedIn could slip under the radar to many, a sudden rise or fall in employee numbers can give a real-time indication of financial issues at a given company well before an official announcement.
Publicly available online data can be collected from websites such as Crunchbase, including information on funding rounds or recent appointments, which can provide an up-to-the-minute (and free) early warning system about the financial future of companies. This has the potential to give insurers the insights which they need to remain competitive in an environment where risk premiums are harder to calculate than ever, and Covid-19 continues to fundamentally disrupt the business models of companies everywhere.
How publicly available online data offers a different approach to fraud prevention
Insurers in all industries are under significant pressure already. Lloyds of London expects to be forced to pay out over £5bn of insurance payments due to the pandemic. But Covid-19 is also likely to cause a pronounced spike in fraud attempts, as difficult economic circumstances often tempt businesses to try their luck. Fraudulent insurance claims increased 17 per cent in the wake of the 2008 recession, and we expect these trends to emerge again. Insurance companies who may already have furloughed or laid off employees may struggle to process these claims in a timely manner as a result of staffing issues.
Automated online data collection solutions can allow insurers to verify these claims faster, as freely available online data can be a useful tool when it comes to checking these claims. Online data can help to identify if a claimant’s online profile is at odds with the claim presented, however large enterprises are constantly generating relevant details which all need to be cross referenced and analyzed as part of the assessment. This is because details like their stock price and key employees are constantly fluctuating and are almost impossible to keep track of manually, so it requires an ongoing automated data collection solution. This can provide insurers with a real-time warning that something is wrong and represents an example of how publicly available online data can not only stop fraud in its tracks but can also allow real and honest claims to be paid faster. This means there will be more money left over to give to businesses whose finances (and employee wellbeing) are under significant threat.
How data collection automation can improve insurance underwriting
Not only is collecting all the available online data needed to verify claims difficult (if you do not have the right tools to hand), but it is also immensely time consuming. Automated online data collection solutions mean that simply more data can be collected than if purely traditional means are utilized, and if claimants are required to manually fill out endless forms to provide the requisite information. More data means better risk assessment which leads to smarter pricing, increased gross margins, and a fundamentally improved underwriting process. It can also make for a much faster onboarding process for new customers, allowing for faster business growth.
For example, if an insurer wants to ascertain if a struggling hotel chain is credit worthy, automatic data collection can be utilized to scrape public data from their website (or 3rd parties like Booking.com) to see how many rooms are available, and the type of price they are charging in key locations. This will go a long way to filling in any potential gaps left by more traditional sources of data. As insurers can receive these types of updates in real-time (alongside other relevant data like corporate news or stock prices) this represents a superior option to slower moving avenues.
As the economic consequences of the pandemic will almost certainly lead to further sudden spikes in insurance claims, having as much of the data collection process automated as possible gives businesses the infrastructure necessary to rapidly scale to the level of claims that need to be handled.
What is the right approach to online data collection?
Unfortunately, collecting massive amounts of data at true scale can be arduous undertaking if you do not have the right tools, although these problems can be relatively easily seen with the right data collection set-up. Many websites block any activity which seems like it could originate from competitors trying to collect data, or that could indicate malicious activity such as botnets, as these requests generally originate from data centres. Such as, the information available to typical consumers like you and me, is not the same as what is available to businesses.
Therefore, they would be best advised to use some form of a data collection network based on residential IP addresses, as this will allow them to appear as a typical consumer would when collecting online data. By using these types of networks, they can, for example, mimic an android user in Thailand or an iPhone user in California, and effectively collect data in any part of the world without restriction.
A new set of challenges for the insurance industry should mean embracing a new set of solutions. If the industry wants to be able to adequately protect itself and come out on the other end of the barrage of new claims 2021 could bring, they need to have the wealth of data necessary to process them quickly and accurately. Taking an open minded and efficient approach to the type of data which they use will represent a big part of this, and embracing publicly available online data will be a key element of the transition to a more modern approach to data-driven insurance.