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Financial services big data - the regulator is looking on

The true value of well managed data becomes clearer as FSA step in

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You can’t avoid doing Big Data projects, and why would you want to?

As you prepare for them, it is not just the data quality and the analytic tools you have to worry about, it is regulation too.

The insurance industry offers an example. For some time the industry has been debating how to make the best of big data, wrestling with the variable and sometimes indeterminate value of data points and the question of whether consumers will accept black boxes en masse, in return for lower premiums.

While the industry was debating whether all this effort would increase revenues, the regulators have got in on the act, with the Financial Services Authority and the Association of British Insurers agreeing to put their heads together.

A good practice guide protecting the customer data collected through telematics is expected to be available by summer. The aim is to provide guarantees about data and data use, but that isn’t the end of the matter.

The guarantees will enable customers to make informed choices, and the market potential for telematics will become easier to read. IT managers in turn will be able to respond with more clearly defined requirements for the protection and use of all this extra data.

Telematics devices are detailing the time, date, location, distance travelled, speed, acceleration/deceleration and time spent idle of a vehicle in any journey. It’s a hugely significant amount of new detail for any insurance system to cope with. This is in addition to automatic notification of incidents and live footage shot during accidents.

Questions remain though: is a driver who brakes heavily a careful or nervous driver - a good risk or a bad one? Only experience is going to inform insurers, and it’s still very early days.

IT chiefs can expect rapid changes in management responses to data points as this market evolves - heavy braking could be considered good one day, and bad the next. The systems will be expected to cope with the switch almost immediately.

As the answers to big data questions slowly emerge, the only way to future-proof insurance systems is to build nimble, responsive solutions which are fully integrated, and able to adapt quickly to new data definitions.

Data capture and management has to be seamless across all component channels, not just for the sake of efficiency, but also, the crucial need for live, real-time management information.

Systems need to integrate with a wide range of solutions, augmenting third party data, to reduce fraud, improve the customer experience, and make sure the right prices are being set.

Those financial services providers who get started first will stay ahead of competitors - working off more accurate and timely information, moving to market faster, and pricing better to attract more good customers.

Posted by Mark Bates, CEO, insurance technology specialist RDT

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