Insurance providers in the UK are expected to rely more heavily on big data analytics solutions this year in order to provide more personalised offers to customers.
Research conducted by Teradata revealed that more than four-fifths of companies with turnover of over £500 million (82 per cent) will be prioritising this technology in 2016. Meanwhile, smaller firms are still lagging behind in this area, with just 46 per cent of providers with under $500 million in turnover agreeing with this.
Despite the growing interest, there is still work to be done in some areas order for the UK insurance sector to catch up with those in other countries. It was noted that on average, 76 per cent of large firms in France and Germany are able to 'fully deploy' consumer data in order to make use of analytics, compared with just 63 per cent of British companies.
However, the UK was said to be ahead when it comes to incorporating technology such as the Internet of Things into their big data. This is an area that's set to be particularly important to the insurance sector, with tools such as telematics increasingly being used in motor insurance to provide quotes that reflect a person's driving habits.
Three-quarters of companies in the UK described themselves as "very well equipped" to exploit this.
As well as analysing customer behaviour and preferences in order to provide more personalised quotes and offers, nearly three-quarters of large insurers (73 per cent) stated that they will be using big data to help tackle underwriting fraud.
However, insurers have been warned they need to be cautious in their use of consumer data, in order to avoid falling foul of privacy regulations and to avoid alienating their customers.
Computer Weekly reports that at a discussion event in the city of London, chief executive of civil liberties pressure group Big Brother Watch Renate Samson noted that the trend towards personalisation will not be allowed under the terms of the European Union's forthcoming General Data Privacy Regulation, which will prohibit profiling or predicting on the basis of behaviour, attitudes or preferences.
She added: "People feel creeped out having their social media activity or web browsing watched. If an insurance or other financial services company comes to me offering a service and I realise they've been looking at my Facebook or Twitter, they will come a cropper."
Getting people engaged with the use of big data has also proved a challenge for insurance providers in the US, despite the potential savings that individuals stand to make as a result of allowing the use of technology such as telematics.
According to figures from US insurer Progressive, reported in a recent article in the Wall Street Journal, around 80 per cent of its customers would qualify for a discount on their premiums through the use of IoT solutions that monitor their driving behaviour. However, just a quarter of consumers have signed up for this, with a further 40 per cent stating they would never give their consent for this type of tracking.