March 19, 2018 11:30
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The use of big data has advantages for the insurance industry, but must make compromises to reap the benefits, says The Geneva Association, a think tank that brings together leaders of a number of insurance companies around the world, in a report.
If the scanning and the application of the analyses of big data have the potential to reduce the cost of insurance through the automation of processes, the actors of the insurance industry should pay attention to the protection of data and privacy, to the individualization of the insurance and the competition.
Important compromise to make
These issues give rise to important trade-offs that must be the insurers and regulators, the report said. In particular, they need to find a balance ” of fundamental importance “, since inadequate data protection will lead to an erosion of consumer confidence, while a regulatory framework is too strict will prevent the company from reaping the fruits of these data.
The association believes that there is no single solution. Rather, insurers are required to ” assess the implications of the use of personal data on a case-by-case basis “. The challenge for regulators is to ” establish a regulatory framework that is flexible and facilitates the establishment of an appropriate balance “.
Benefits for all
Among other benefits, the group lists the reduction of the asymmetries, which increase inefficiencies, as well as new proposals of coverages for risks that were previously considered non-insurable.
Furthermore, big company profits can be derived from the use of big data, highlights the group. They also lead to new approaches to encourage behaviours careful and cautious, allow for early intervention and the prevention of risks based on the predictive analysis. “Ultimately, these technologies are changing the role of insurance, the latter from a pure protection against the risk to the prediction and prevention of risks. “