The Use of Big Data and the Role of Actuaries in Inclusive Insurance Markets

The Use of Big Data and the Role of Actuaries in Inclusive Insurance Markets

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Estimates based on World Bank data indicated that about 50% of the global population (about 2.5 billion) have no access to formal financial services. It is estimated that globally there are currently about 500 million inclusive insurance policyholders. This number and the insurance markets in emerging economies are growing rapidly. In mature markets, actuaries play important roles in product development, pricing, risk management and solvency. In emerging markets, actuaries may not provide certain functions or services typically provided by actuaries in developed markets. However, there remains a need to be able to determine adequate and appropriate premiums, policy and claims liability and capital level, and these activities require a certain level of training and experience.  

The development of financial inclusion and inclusive insurance more specifically, is occurring. There are many challenges, social, cultural, educational, environmental and appropriate business model to address. Inclusive insurance and conventional insurance both provide insurance services. However, approaches, contexts and successful delivery models can be different. There are many examples of where conventional insurance approaches have failed in inclusive environments.

There is no single solution to providing actuarial services in inclusive environment.  For example, micro insurance markets are distinctly different depending on unique regional contexts and characteristics.  The lack of information in these markets makes it harder to design and viably deliver these products.

The biggest potential for using big data in the microinsurance arena lies in getting the distribution and sales channel right. By understanding customers’ propensity to buy and tendency to stick with the brand, microinsurance operations can improve customer relationship management thereby reducing costs and increasing the ability to scale. Ultimately, this could make for a more sustainable industry.

Big data is providing new information in these markets that can be used to take on this very challenge.

This paper focuses on emerging economies and in the role of actuaries in proving services in an inclusive insurance context. We will also focus in how the use of big data and new technologies can improve insurance penetration in countries where the inclusion of the population to the insurance market is still very low.

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