Question

Categorize the various characteristics, and sources of big data available for insurance and risk management applications. Please be sure to include the benefits and possible disadvantages. Explain the different types of big data such as internal data, external data, traditionally structured, and unstructured data.

Answer 1

The various categories of big data that are available for insurance and other risk management applications are user behaviour data, Lifestyle data, eating habits and the exercise as well as vital health statistics along with health records and frequency of visit to healthcare centres. These big data are collected from various user interactions with the various devices. For example, insurance providers for motor insurance can get data associated with driving habits and can then offer a tailor made insurance while adjusting the premium with regards to the risk of accident. This data can be made available from the cars various sensors which gets uploaded to the cloud for predictive maintenance by auto OEM.

Similarly insurance providers can get access to health records or the data available on the activity tracker linked to the smart phone to understand the amount of physical activity done by a person and thus could compute the risk of a heart disease and so offer a health insurance based on the same.

Thus using big data, customised solutions are possible and it is also possible to segment the market at an individual level and meet the requirements of individual customers. It also makes the entire ecosystem much more efficient and each customer gets an insurance based on their risk profile.

The disadvantage is that privacy of individual customers may get compromised to a very large extent and there is a chance of discrimination or bias against a group of customers which may distort the final output.