This article was
first published in the Soapbox section of Financial Times on October 23, 2014;
Co-Author: Saumya Rastogi
The insurance sector lacks data scientists and
business schools need to offer specialised courses
Analytics and big data are the flavour of the season and every
educational institution worth its name has introduced courses around them.
Magazines, books, articles are flooded with information on the use of analytics
and the harnessing of big data.
Analytics is the process of gathering together huge chunks of data and
then drawing business insight using various models and tools. Analytics helps
companies and businesses to make better informed decisions and there is a huge
demand for data analyst/scientists in today’s world.
Reading the recent books on big data and going through the syllabi of
analytics courses offered by various business schools across the globe, the use
of big data in marketing and sales, banking and engineering is evident.
Customer analytics, social media analytics and many other forms of analytics
such as cloud analytics, web analytics, channel analytics and content
analytics, also find their way into the course contents.
However, the missing link is insurance analytics. Insurance is one of
the most data intensive industries. Historically actuaries and underwriters
have always dealt with large data sets and have used these to make decisions.
But in spite of this, insurance analytics rarely features on the business
school curriculum. Financial analytics courses tend to be focused on the stock
and bond markets and while there are elements of fraud analytics and
visualisation in a number of courses, none of them teach these techniques with
application to the insurance industry. Even insurance specific courses in
business schools lack focus on analytics.
It is time that business schools recognise that there needs to be
specialised courses on insurance analytics. In fact schools should go further
and each line of business in insurance should be a module in itself for the
purpose of analytics. For example, motor insurance, its issues and the kind of
analytics it warrants is very different from life insurance. Similarly, health
insurance has its own issues which are very different from fire or marine
insurance.
According to a report by PwC on ‘Top Insurance Industry Issues 2014’ one
of the most significant issues faced by the insurance companies is data
analytics. The insurance sector lacks data scientists, even though it has
access to pools of data, it is unable to turn that data into advantage.
A lack of skilled analysts in this sector is preventing the insurance
industry from advancing. This is especially true in emerging countries where
insurance penetration is low and the use of analytics is far more important,
both as a means of capturing and creating markets as well as a tool to help
underwriters who are having to make decisions with limited information about
risks.
Business schools need to recognise the potential of this untapped market
and contribute to the development of this sector by offering courses on
insurance analytics. Not only would the insurance sector benefit, but this
would also be good economics for business schools. Currently there is a huge
demand for insurance analytics, but as yet only a handful of suppliers.
Failure to act will mean that business school students who enter the
insurance sector will be ill-equipped to deal with insurance in the 21st
century.
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