Life insurers have a significant amount of Big Data on consumers but they don’t know what to do with it, says Finity Consultant Nicholas Warren.

“[They] have been collecting data for a very long time,” he told the Actuaries Institute Financial Services Forum in Melbourne. “But they don’t know how or what to do with it yet.”

Mr Warren says most insurers are at the stage of building business analytics systems and reviewing why things happen.

The next step will be moving to predictive modelling which takes data analysis to a proactive state but it is more complex.

“Proactive modelling is where everybody wants to be, but nobody is there yet,” he said. “This is not a one-direction process – every step relates to a previous step.

“It is a journey that requires people and time.”

Mr Warren says while most companies are moving towards predictive modelling and algorithms are being developed to interrogate the data, most are being created from a one-process approach.

“There is no silver bullet, and one size does not fit all,” he said. “There is a huge array of methods to analyse this data, but if you don’t know what you are doing it will be a disaster.”

Finity Principal Stephen Lee told the forum that life companies are using more analytical tools for segmentation as they try to know their customers better.

But he says costs are high for data analytics and this has to be offset against communicating value.

“We have to pay for getting the data and then setting up the systems to analyse it,” he said. “The biggest hurdle is finding the right people to undertake the analysis.

“They need business management skills coupled with analytical skills – those people just don’t exist.”

He says the next 10 years will see Big Data being used in pricing and underwriting, customer retention and claims, as insurers get to know their customers better.

“It will be about understanding what people need and what strategies will be developed to keep them.”