Imagine a time when your car is constantly sending data about your driving habits to your insurer. How much time you spend driving, where you travel, when you drive, even how fast you drive – all transmitting from meters in your car (or your phone) to an insurance company's data center. What might strike some as an invasion of privacy could also mean big savings for safe drivers, as insurers use the data to set individualized rates based on real driving behavior instead of demographics and average risk.
That near-future scenario was one of many examples AIG Chief Science Officer Murli Buluswar offered in his Computation Institute talk on October 10th to illustrate how big data is transforming his company – and the insurance industry at large. From new insurance products to the automation of broker decisions, the insurance giant is looking at multiple ways to revamp its business using data analytics and modeling. Buluswar's team is leading these efforts, drawing from the huge amount of data AIG already possesses about the items it insures, including everything from cows in India to satellites in outer space.
"We have more data on risk than just about any other institution or organization in the world," said Buluswar, a graduate of the Booth School of Business. "We want to be able to augment our internal views with external data…how do we combine the two to understand the world better and make smarter decisions across every aspect of what we do."
Many of the early projects that Buluswar described involved making long-held, but inexact procedures of the insurance process more precise. For instance, to set the price for insurance plans, companies must currently make educated guesses about a customer's sensitive price points or the prices that their competitors will offer. By collecting data and modeling the demand of customers – and the behavior of other insurance companies – Buluswar said an insurer can practice smarter pricing by managing to micro-segments of customers instead of broad portfolios.
For a more specific example, Buluswar spoke about the unexpected fruits of an analysis of truck drivers and businesses. The team is using publicly available data from the National Highway Traffic Safety Administration, collected at truck scales across the country, to find new ways of measuring risk in the truck driving population. But the company also sifted through data to find new ways of reducing risk. A finding that most truck accidents are caused by fatigue, and that one main contributor of fatigue is sitting on a vibrating engine for a long period time, led AIG to work with speaker company Bose to create a new kind of vibration-absorbing seat cushion that can be issued to AIG-insured truck drivers.
In the future, Buluswar sees insurers expanding to entirely new industries, built upon advances made in artificial intelligence, 3D printing and genomics. For example, self-driving cars, which may hit the market as soon as 2020, present an intriguing challenge for auto insurers – how do you insure a vehicle when the driver is a computer? Technology also produces new sources of risk that insurers must prepare for, such as cyber-terrorism and hacking. But overall, companies like AIG see the growing flood of data as an opportunity to dramatically modernize their business for the 21st century.
"I think that this proliferation of data all around us is powerful in shaping every aspect of what we do as a company, and frankly, any vertical industry you can think of," Buluswar said. "You're going to see more and more titles that say Chief Science Officer or Chief Analytics Officer."
Click here for an Adobe Connect archive of Murli Buluswar's talk.