Many insurers say big data promise is “overblown”: survey

A slight majority of insurance companies in a recent survey associated “big data” with risk, fraud or research initiatives, but most insurers also said the promise of big data is “overblown,” according to a recent report from Celent.

The report, titled How Big is Big Data? was based on a survey of 36 business and information technology executives and managers at 33 financial institutions. Celent broke down most of the results by banks and insurers.

Respondents were asked “How do you regard big data?” and to indicate their agreement or disagreement with certain statements.

Although 90% of bank and insurance respondents agreed that “skillful use of big data will define future winners in financial services,” 60% of insurers said “the promise of big data is overblown.” Fifty-eight per cent of respondents from banks said “big data is a trendy term for what we’ve been doing” while only 30% of insurers agreed with that statement.

While Celent noted the term big data is “ill defined,” only 10% of insurers said the term was “too poorly defined to be useful” while 42% of banking respondents agreed.

To narrow down the definition, respondents were asked to select up to three phrases, provided by Celent, that define big data. Nearly three in four (74%) picked data that is semi-structured or unstructured, 68% picked predictive analytics or modeling and 59% selected “large volumes of data that can be accommodated with traditional relational database management systems.” Only 27% selected social media data.

Celent also asked respondents what areas they have, or expect to have, big data projects. Four out of five of insurers selected marketing, 70% said research, 60% answered risk and fraud and 60% cited customer experience while 30% selected operations. The total added up to more than 100% because respondents were asked to select all that apply.

“Significantly more banks associated Big Data with risk or fraud initiatives (95% vs. 60%),” Celent analysts wrote in the report. “In contrast, significantly more insurers (70% vs. 35%) associated Big Data with research initiatives and offered other areas of interest including actuarial, reinsurance risk, and product development. Insurers seem intent on using Big Data solutions to research and develop new products. Banks and insurers answered similarly in closely associating Big Data with marketing and customer experience initiatives.”

The report was written by Craig Beattie, a senior analyst for insurance, based in London, and Bob Meara, a senior analyst for banking based in New York. It was based on both an online survey conducted last December and January and on phone interviews conducted in February.

Celent’s parent company, management consulting firm Oliver Wyman Inc., is a subsidiary of New York-based Marsh & McLennan Companies.

In the survey, Celent asked banking and insurance managers how long their organizations had been actively investing in an implementing big data projects. A majority of insurers indicated they had a year or less of experience and one in four said they had one to two years, while none of the insurers said they had more than two years experience in big data.

“A handful of North American banks enjoy a considerable head start in terms of their longevity of experience,” according to the report. “Among financial institutions with longevity of experience (more than one year), 70% of projects have met or exceeded business case expectations. For these institutions, the promise of Big Data is very real.”

The respondents were also asked which hardware and software vendors they perceive as being leaders, and Celent ranked them in order of mention. The vendor most often cited as a leader by respondents, for both software and hardware, was IBM Corp.

Three distributors of the Apache Software Foundation’s Hadoop open source software for distributed computing – Cloudera Inc., Hortonworks Inc. and MapR Technologies Inc. – ranked second, third and fourth respectively in software. On the hardware side, EMC Corp. and Hewlett Packard Development Company LP placed second and third respectively.

Oracle  Corp. ranked fourth in hardware and seventh in software. Analytics software maker SAS Institute Inc. was fifth while SAP AG was sixth on the software side. The fifth most cited hardware vendor was Teradata Corp.