Over the past few years major companies around the world have been exploring the opportunities presented by so-called Big Data. Collecting as much publicly available information as possible about customers increases understanding of individuals’ present and future needs, and also opens up new marketing prospects.

But while Big Data has the potential to reveal new market trends and can even help identify customer fraud, it requires big investments to capture, organise, store and analyse the information.

Nevertheless, the potential for insurers in expanding their offerings to their customer base, rewarding valued customers, designing new products and amending others to attract more business should be obvious.

But according to a new report from KPMG, while insurers are starting to see the importance of Big Data they have been slower to adopt it than sectors such as banking.

“I think data and analysis in general is under-utilised by the majority of organisations I have worked with, and this applies doubly so for Big Data and insurers,” KPMG Senior Manager IT Advisory Gladwin Mendez says.

Compared with the banking sector, insurers have been slow to invest in new technology, he told insuranceNEWS.com.au.

“Technology-wise, banks are ahead of insurers and are constantly innovating. For example, name a bank that doesn’t have a phone app – there aren’t many.”

Mr Mendez says insurers need to leverage Big Data to stay ahead of competitors or risk being left behind.

As a first step, they should consider using the data they have available now on their own databases, because there are valuable insights to be gained.

“You don’t have to use a costly, risky, big bang approach.”

Publicly available external data such as credit reference agencies, census information and police stolen vehicle databases can also be used.

He says one unnamed Australasian insurer has used data analysis through increased automation to stop millions of dollars in fraud claims this year.

“The analytics performed now also feeds into their customer policy information and claims team, to flag potentially fraudulent customers in almost real time.”

If a high-risk customer makes a claim, the claims team can ask additional questions and request more paperwork. Conversely, claims with a low fraud risk or valued customers with a good history can be fast-tracked.

Corporations such as Woolworths, Wesfarmers, Australia Post, Commonwealth Bank and AGL use data analytics for customer metrics, marketing strategies, risk management, audit reports and supply chain management.

Global technology vendor SAP, which offers data solutions to big and small companies, says some insurers in Australia are planning Big Data initiatives over the next year. Some are already using consumer, business and geospatial data in a limited way for underwriting, actuarial and product development.

“Because their interaction with customers is relatively infrequent, insurers do not have rich transactional data to work from,” Head of Financial Services in Australia and New Zealand, Nick Frolich, says.

An app developed by SAP for Fire and Rescue NSW using data to predict emergency response and manage resources could be of benefit to insurers, he told insuranceNEWS.com.au.

Overseas, a survey last year by the Association for Co-operative Operations Research and Development (ACORD) found North American insurers spend $US10 billion ($10.83 billion) each year on data and analytics, with 9% of their IT budgets used on data and analytics and three-quarters of those surveyed planning to increase spending.

ACORD says pricing and fraud reduction were seen as the main uses for Big Data.

US retailer Macy’s says analysing data more thoroughly has helped to increase store sales by 10% and to automate critical reports, saving analysts’ time.

Mr Mendez says data analytics that monitor social media and customer loyalty programs can reduce costs and customer churn.

“Insurers could address key factors such as customer loyalty and behaviours by using analytics – giving them the ability to gaze into policyholders’ activities and then suggest a new product or policy limit,” he told insuranceNEWS.com.au.