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Insurers must move fast on big data to avoid losing business

Posted On: Oct. 17, 2017 6:12 AM CST

MONTE CARLO, Monaco — If insurance companies do not step up their efforts to understand and deploy big data, they could find themselves losing business to other companies such as Google Inc. that have mastered its use, according to experts.

Big data provides a way to get a better understanding of consumers, and companies such as Bentonville, Arkansas-based Walmart use it to personalize the consumer experience, Valentina Paduano, enterprise risk management specialist for Prysmian S.p.A. in Milan told attendees of the Federation of European Risk Management Association Forum 2017 conference in Monaco on Monday. For example, if a consumer purchases a barbecue grill, Walmart’s system will automatically send him a coupon to spend in the closest store — and only if good weather is expected, she said.

“Walmart is a really good example to explain how we can use the data and obtain high economic value,” Ms. Paduano said.

For the insurance sector, the effective use and management of big data could contribute to fraud prevention because of tracking of client behaviors and events; customization of technical and commercial pricing, mainly for car insurance; and effective claims management thanks to process automation.

“Big data may completely change the model of the business of insurance, particularly on the retail side,” said Alessandro De Felice, chief risk officer for Prysmian and president of ANRA, the Italian risk management and corporate insurance association. “This is associated with the number of apps that provide data on the behavior of the insured person.”

But insurers must also be careful about the disruption that Mountain View, California-based Google can cause with the volume of data that it collects and how it can use that data, because the technology giant “could be an insurance company,” he said.

The use of big data in the insurance industry has many positive implications, but it also will be a challenge to implement in the industry because of regulation, Ms. Paduano said.

For example, a potential model would be for consumers to exchange their information for insurance, but “it’s very difficult to do this kind of innovation in insurance because it’s a regulated market,” Mr. De Felice said.

“The management of big data is not an easy process,” Ms. Paduano added. The main risk is related to the incapacity or difficulty of collecting data in an accurate and complete manner and transforming the information into knowledge — a process complicated by a lack of modern and effective information technology and skilled personnel or a lack of or inadequate governance structure, she said.

Prysmian has incorporated the use of a risk management information system within its own operations — a nod to the fact that the undersea cable manufacturer and laying contractor is engaged in “risky” work for offshore oil and gas platforms, windfarms and electrical grids, and the fact that if any of its three production plants or three vessels were rendered inoperable, that would pose a serious risk to a company because it would require extensive capital to replace these critical assets, Mr. De Felice said.

“Our target was how can we manage the risk in this area by having a clear vision and clearer reporting of the status of the risk, since the moment that a big contract is signed to the moment when the project is completed,” he said. “This is a tool to integrate risk management into project management.”

Prysmian’s submarine underground connection business contributes 20% of its revenue, Ms. Paduano said.

“For us, it’s really important to understand and eliminate the risk related to these projects,” she said.

The company also identified its contracts as another major risk factor, Ms. Paduano said.

“These contracts require very huge guarantees and penalties in case of project delay or performance (issues) or any other particular specifications defined at the contract level,” she said. “For us, it’s really important to have control of the day-by-day operations during the project execution, but also during the beginning phase before the contract signing because it’s important for us to understand what are the potential risks that could affect our business during the project execution.”