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Data Analytics – The Secret Ingredient in Future-Proofing the Insurance Sector?

As the climate crisis worsens, so too has the number of natural weather-related events increasing the risk to properties. Historically, it has been difficult for homeowners to insure assets against unpredictable climate effects. But how can data step in to benefit insurers and homeowners alike? 

Ciaran Dynes is the chief product officer at Matillion, the data transformation software provider. Dynes boasts over 20 years of experience in product development companies and has held roles at the likes of Talend, Progress Software and IONA Technologies

Here, he discusses the role data analytics could play in modernising insurers to deal with changing weather conditions caused by the climate crisis. 

Ciaran Dynes on data in insurance
Ciaran Dynes, chief product officer at Matillion

Despite efforts to tackle climate change, we’re not moving fast enough. And the UK isn’t alone in having begun to experience dramatic changes to its weather patterns in recent years.

As well as unpredictable weather events, global warming is also leading to significantly rising sea levels, with UK coastlines currently experiencing a three to five-millimetre rise per year, putting the future of many seaside towns at risk. The repercussions could potentially disrupt life as we know it, with the resultant coastal erosion and flooding likely to impact people, infrastructure and natural systems heavily.

Over the last few years, coastal homeowners have increasingly faced issues when attempting to secure the future of their properties. Not only are prospective buyers being put off by the inability to obtain a mortgage to buy, but existing property owners are even struggling to insure their homes.

Amid such unpredictability, data presents a huge opportunity for insurance companies to improve their underwriting and better manage risk. Many will have large swathes of granular data at their disposal – everything from information on policies and policyholders, to risk assessments and claims histories, and that abundance can often be underwhelming. Often it’s not stored in a ‘business-ready’ form that allows them to extract real insights, either. So how can insurance organisations make the most of their data capabilities to protect themselves and their customers?

Why are insurers pulling away?

Historically, many home insurance plans have not covered ‘earth movements’ such as earthquakes, erosion, sinkholes and landslides. Previously, they were such infrequent occurrences that they were often considered too costly to be factored into the premiums, and in many cases, insurers didn’t have the appropriate historical and modelling data to properly assess the risks.

As this is clearly no longer the case, we need to see a vital change in the industry. Homeowners need to be protected in the event of the worst-case scenario, while insurers must safeguard their assets. However, this is new territory for insurers and it’s creating huge challenges for providers. Modelling future climate scenarios and ensuring complete policy coverage for natural phenomena is a herculean task and a practice that is still a relatively novel one. Using data to inform decision-making and minimise uncertainty is a crucial consideration.

Data to the rescue

As the world begins to focus on the climate crisis at hand, data isn’t often the first solution that comes to mind. However, as a reusable and renewable resource, data can work wonders in supporting insurers and helping them to manage some of the unpredictability we’re facing – but only if it’s deployed in a productive, efficient way.

When it comes to insuring these natural phenomena, underwriters need the relevant environmental data and insights to create accurate and fair policies – information that they are often currently lacking. Investing in the right data analytics tools can help insurers to accurately track and predict localised climate impacts and emergencies. On-demand access to an insights stream – transformed from a raw state into business-ready data – is allowing brokers to communicate more informed analysis to these vulnerable populations of homeowners.

Roadblocks to data-driven sustainability

Over the last few years, we’ve seen significant processes in the digital transformation of organisations from a wide range of sectors, but many still struggle with loading and transforming their data at scale. Insurance companies rely on the right people being provided with the right data at the right time. If the data employees need is difficult to locate and extract, they won’t be able to react to market trends in a timely manner – ultimately hampering productivity.

Though insurers will likely appreciate the importance of data, it’s still very common for them to face obstacles when extracting its full value. A democratised cloud data system will enable businesses to consolidate their current data sources and make them accessible from one centralised platform. To make the most of the investment, it’s important that these data tools are democratised and rolled out across the entire insurance company. From risk appraisal to claims management, all areas of the business could benefit from being more productive with data.

On a larger scale, government and policy-makers can also reap the benefits of real-time climate and risk data. Once you know which areas are most at risk, it will allow you to make forward-thinking decisions and planning. This could be applied to both the development of new buildings and facilities, but also the protection of existing infrastructure. In the long term, it’s all about effectively using the resources and technology available to make smart decisions which can benefit the whole community – from the insurers to homeowners.

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