Big Data represents big challenge for insurance industry: study

The growth of unstructured, disparate information will create problems for insurance companies that don’t have the technology infrastructure or tools to handle it, according to a recent report from consulting firm Novarica.

‘Big Data,’ defined as data sets that are too large or complex to work with using traditional database systems, could create a broad “analytics” gap between large and midsize insurers, noted Matthew Josefowicz, Novarica’s managing director, partner and co-author of the study, Analytics and Big Data at Insurers: Current State and Expectations.

“While data analysis has always been at the core of the insurance industry, legacy technology environments and business practices have inhibited the embrace of Big Data by insurers,” Josefowicz stated. “But the hype around Big Data has renewed focus on little data — traditional enterprise data and analytics — which is still an area of underinvestment for many insurers, especially midsize insurers.”

In a survey of 86 insurers, 15% to 20% said they are preparing their technology infrastructure for Big Data projects. Josefowicz noted that adoption rate of technology around Big Data was “tepid” in the insurance industry and lags behind other sectors of the economy.

“When it comes to Big Data areas like geospatial data, Internet clickstreams, audio data, social media content, mobile data, telematics, video data and others, usage rates are still very low,” Josefowicz commented. “And while few insurers have invested in the specialized infrastructure required to manage Big Data, a sizeable minority are planning to do so within 12 months.”