In very general terms, big data expertise means the ability to analyze vast amounts of information in order to make rough predictions about human behaviour and future trends. The purpose is to use these insights to make smarter strategic decisions, achieve efficiencies and develop products better suited to customers' needs.
So on the face of it, big data science is also going to prove immensely valuable to the insurance industry, whether in helping city authorities prepare more systematically for the increasing frequency of catastrophic flooding or in proposing viable solutions to financing our ageing societies.
Indeed, growing numbers of thought leaders in the risk management world urge that big data should play a far stronger role in the risk assessment process. For example, an article in the February 19 edition of the MIT Sloan Management Review quotes Professor Ron Kennet of Ljubljana University and Bill Pieroni, Chief Operating Officer of the insurance broker Marsh, as saying that the usage of big data can help risk managers identify, model and mitigate hugely disruptive, largely unexpected events, the so-called "black swans."
But data-driven analytics also has its potential dark side. For example, I am sure that its proponents are also keenly aware of the concerns the general public has over the usage of individuals' personal information for commercial ends, unease which has been amplified by the revelations surrounding the rampant data collection programmes run by the NSA.
A senior executive at Cisco, the communications infrastructure company, has also expressed worries over data collection practices by some city authorities. His comments are perhaps especially noteworthy since Cisco has a major stake in the usage of data to increase efficiencies in urban environments. In a recent article in the Guardian online, Wim Eifrink who heads up the company's "smart cities" team, is quoted as saying that privacy must be a key plank in any smart city strategy if urban administrations wanted the buy-in of their citizens. To build trust, he said, people needed to be given the choice of whether or not to allow governments to use their data. http://www.theguardian.com/news/2014/apr/04/if-smart-cities-dont-think-about-privacy-citizens-will-refuse-to-accept-change-says-cisco-chief
Are Eifrink's observations on data privacy also valid for the insurance industry? I think so.