For the insurance industry the use of data, including the use of large sets of data that may be referred to as “Big Data,” is nothing new. Insurance is a data-driven enterprise. It always has been and it always will be as companies use large quantities of data in innovative ways to improve products and services for the benefit of consumers.
Keeping in mind that increased use of data is tied to insurers competing for business, the potential benefits include lower costs as increased use of data makes systems more efficient, and higher customer satisfaction as insurers use data to improve processes and match outcomes with consumer expectations. Increased use of data in underwriting can help insurers identify risk factors within a larger group that may allow the insurer to offer coverage to certain risks at a lower price than if the data were not available. Use of data to identify fraud can help keep overall insurance costs down.
The NAIC established a Big Data Working Group in 2016 to explore policy implications of insurers’ expanding use of data. Originally working under the auspices of the NAIC’s Market Regulation and Consumer Affairs (D) Committee, in 2017 the Working Group was placed under the newly created Innovation and Technology (EX) Task Force.
NAMIC has stressed the benefits of insurers’ use of new data and use of traditional data in new ways and has favored exploration of the issues that have emerged, including potential issues for concern, while cautioning against making assumptions regarding potential negative consequences. NAMIC acknowledges there could be concerns about quality of data or misuse of data, but insurers operating in a competitive environment are generally incentivized to avoid such issues in their use of data. Additionally, any concerns that may arise in this area can be addressed under the existing market regulatory structure by applying time-tested principles and standards to new practices.