What big data analytics achieve in world of risk
Initially published on
The smart players in the insurance and reinsurance industry recognise the urgent need to modernise. The complexity of risk and the need to get risk management profiles right are leading reinsurance firms towards advanced big data analytics.
spends $250 million (£147 million) every year on data and analytics in the risk space alone.
Everything we seek to do at Aon is to improve risk, reduce risk and help
put our insured clients in a strong position when either retaining risk or
placing risk. The ultimate goal for us is improving risk profiles and better
assessing how we and our insurance partners approach risk.
the right data analytics is easier said than done. This is a 325-year-old
industry, and in many respects, has been fairly set in its ways compared to
other parts of financial services.
terms of how it approaches information, the insurance sector has often relied
on a combination of bespoke deals for large underwriting, and different types
of individual and event risk profiling for commodity insurance. Both are
reliant on the expertise and experience of underwriters and brokers.
the big problem with the way things have been done is that decisions are based
primarily on historic data, rather than predictive market trends and analytics.
has become much smarter about data in recent years, focusing on advanced
analytics, which show in real time what is happening in the marketplace. We run a global centre for innovation and
analytics, established in Ireland in 2008, as well as a newer centre in
have also established what we call the Global Risk Insights Platform (GRIP),
which is the world's largest proprietary database of insurance placement data.
This system takes billing data from our annual premium flow of over $80 billion
of insurance, coupled with quotation data brokered by over 6,500 personnel
around the world, in order to provide clients and underwriters with key trends
and data analysis at their fingertips.
reason for doing this is that the insurance marketplace is very fluid. Insurers
often want to have a clearer picture of the risk they are underwriting and
having the right data helps them to sharpen their risk appetite. Analytics is
really able to help in a post-financial crash environment in which companies
have to focus hard on cutting costs yet simultaneously wish to improve their
investment in data and analytics also supports our global risk consulting
business, in which we advise our customers, across a wide range of industries,
to determine how they can reduce risk. For this, we work with our own advanced
risk experts as well as drawing on our risk profiling systems.
The data challenge
difficulty with excelling in the analytics business is that it requires
different types of talent with different skillsets. As an example, we need the highest skilled
data scientists in our global analytic centres.
inevitably puts us in a talent competition directly against other local
businesses that rely heavily on analytics, such as betting firm Paddy Power. It
also positions us against locally based technology companies such as Google and
Apple. We based the first centre in Ireland, because we already had a strong
business there, and there was a high quality pool of technical and analytical
talent available following the problems of the economic crash.
The future of risk management
Aon we continually convert data into valuable insight for clients to help them
understand new and emerging risks which they may not have
new risks emerge and technology companies become far faster in highlighting
those risks, the insurance industry absolutely has to travel ahead of the
curve. A great example is a flu outbreak in the US: while the main authorities took several days
to understand the problems, Google had created a map within a day, based on
where people were searching for flu vaccines.
similar challenge in keeping ahead could emerge in cyber security. Few people
really understand the risks, and insurers have trouble underwriting it. It is
very conceivable that young technology experts will soon be employed as key
advisers to businesses, so that those firms can properly understand the risk.
Insurers will also need to gain a similar understanding of this area.
growth of technology, and emerging opportunities and risks, are the new
dimensions in which the insurance industry needs to consider. There is a great
potential to do better to analyse
risk for businesses and improve how we help business. It will be the next steps
we take, with technology, data analytics and expertise, that will make all the