Big data could be used by insurers to further refine classes of risk and determine better pricing and availability of insurance coverage to ensure a better match for policy owners, according to the Canadian Institute of Actuaries (CIA).
In a recent statement, titled ‘Big data and risk classification: Understanding the actuarial and social issues’, the CIA said that using big data derived from new technologies can contribute to the healthy functioning of insurance markets.
The institute believes that the use of big data is appropriate in insurance ratemaking, and that access to such data creates improved insight about risk and its contributing factors.
Restricting access to this data could adversely impact the availability or price of insurance for individuals, the CIA added.
“As big data becomes increasingly available through new technologies, insurers can use it to further refine their classes of risks and offer insurance that is more aligned with the different needs and situations of policy owners,” commented Matthew Buchalter, FCIA, Co-Champion of the CIA’s task force on this issue.
Emile Elefteriadis, FCIA, task force Co-Champion said: “The foundation of actuarial work is to analyse risks based on complex datasets.
“Access to more data means insurance ratemaking can be based on more appropriate factors, ultimately reducing risk and setting more refined insurance costs.”
Canada’s actuaries stress that big data – like all data used in ratemaking – is subject to the ethical data collection practices, privacy laws, and information security requirements necessary to protect consumers.
Hélène Pouliot, FCIA, CIA President, said: “We believe in thoughtful innovation and evolution in the use of big data, while ensuring that the public interest is at the forefront of insurance and policymaking.”
