March 6, 2012 by Canadian Underwriter
Insurers and brokers are facing a “perfect storm,” including a data arms race among third party data collectors, business owners and senior executives seemingly out of touch with emerging technologies, changing consumer patterns in post-PC age and a lack of adequate investment in core technologies.
“As with any storm, it will cleanse the landscape, wash away the unprepared and offer new opportunities for those who are ready,” said Greg Purdy, managing partner of insurance and business consulting firm Pathway Partners Ltd.
Purdy made the observations as a panelist at the 10th annual Insurance-Canada.ca Technology Conference held in Toronto on Mar. 5, 2012.
Citing the European privacy commission, Purdy said a “data arms race” has developed between third party organizations collecting vast amounts of data on consumers. “Information, the very foundation of the [insurance] industry, is becoming a new weapon that will determine who wins and who loses,” Purdy said.
Organizations have been able to collect this data because of the changing nature of electronic communications. Purdy said the so-called ‘Social Age’ of communications, which started with the rise of the Internet in 2000, has exposed brokers, insurers and third-party organizations to vast amounts of data related to consumers’ interests and purchasing patterns.
Purdy outlined what he called ‘Zuckerberg’s Law,’ named after the founder of Facebook, Mark Zuckerberg, who said the amount of information people are willing to share on social media will double every two years — representing 1.8 zetabytes of data, which would require $34 billion worth of iPads for storage.
Purdy said the insurance industry has been slow to respond to the data wars. This might be due in part to the industry’s current demographics.
Purdy noted that 52.4% of social media users are between the ages of 14 and 29. In contrast, only 5.5% of social media users worldwide are between the ages of 55 to 63. And yet, according to a Canadian census report, 65% of senior managers and executives in the insurance industry belong to the 55-63 generation. And 56% of brokers fall into the same category.
“This raises some serious questions: Does the leadership group understand the purpose and decision-making behaviours of the largest group using social media?” said Purdy. “Are their organizations developing the technology to identify the opportunities and capitalize on them?”