Authored by Deloitte and commissioned by the Actuaries Institute, this paper outlines the potential impact of ‘big data’ analysis on consumers. It considers some of the resultant public policy issues that will face society such as risk transparency driving better behaviour, the need for Government intervention, and the trade-off of risk reduction and privacy.
Insurance provides financial protection to the community by pooling resources to manage risks. That approach is now being significantly refined by insurers’ increased capacity to examine risks in greater detail through the analysis of large volumes of granular data. The outcome is that increased individual risk pricing will make premiums fairer in that they will be more reflective of that risk.
“Big data” refers to the massively increasing volume, velocity and granularity of data sets that are being accessed and linked. The ability to compile and analyse those very granular data sets is now transforming the way insurers see large pools of consumers and how they price risks. This will have implications for the cost and availability of insurance for all consumers.
The good news is that many consumers will benefit from this new technology. Premium pricing will more accurately reflect risk behaviour – good young drivers will pay less than bad young drivers (or bad older drivers). In practice, price signalling can be used to drive better behaviour and reduce risk. However, there will be a smaller group of consumers that have to pay more for insurance because they are considered higher risk, even though they may not be able to control the risk they seek to insure. This paper outlines the potential impact of ‘big data’ analysis on consumers and considers some of the resultant public policy issues that will face society.
The Green Paper is available here.
The microsite is available here.
About the Authors
Paul is a Financial Services partner with Deloitte in Sydney. Over his career, he has developed a thorough understanding of the internal workings of the life insurance and wealth management business. He has been active in the management of the actuarial control function to ensure businesses are completely understood and viable options are communicated to management and the board. Paul has been the Appointed Actuary of 6 life insurers.
Paul presented to the Financial Services Forum in 2012 on “Analytic applications in Life Insurance” and at the Forum two years later on “Are ready for disruption?”
Kaise is a Partner in the Deloitte’s Actuaries & Consultants practice and has extensive general insurance experience in the Australian, New Zealand and United Kingdom markets. His experience includes being responsible for Board and Management advice on strategic and operational matters, insurance reserving recommendations and structuring of reinsurance programmes including impacts on capital and profit volatility.
Kaise has experience as Chief Actuary, Appointed Actuary and in reviewing actuary roles, and has lead a number of GI M&A streams.
Kaise has presented papers to a number of industry forums including Actuaries Institute Forums on numerous topics including offshoring and GI trends, developments and pricing.
Alan has recently joined Deloitte as a Partner in the Actuaries & Consultants group in Sydney. He has 30 years’ experience in corporate executive and consulting roles in Australia, Asia and Europe. He has worked across life insurance, superannuation, wealth management, health insurance and general insurance in technical and general management roles.
In consulting, he leads multi-disciplinary teams to advise senior executives in financial services organisations on improving the performance of their businesses.
He has a keen personal interest in technology and has presented at various industry conferences and facilitated corporate strategy sessions on innovation, disruption and the impacts of change on insurance.
Marc is manager within Deloitte Actuaries & Consultants, having transferred from Deloitte UK in 2014. He has experience in a wide range of areas including traditional life insurance, reinsurance, banking and general statistical analysis.
He has managed actuarial audits, regulatory reviews, reporting, pricing, capital, business planning and transformation work, within life insurance and reinsurance. He has also carried out due diligence and strategy formulation on banking and mortgage lending M&A transactions.
Having presented on the topic at the 2016 Financial Services Forum, he has a keen interest on the future of the actuarial profession and ensuring actuaries remain relevant, as well as in areas impacting the future of the insurance industries and the way people work.