What Industry Gets Wrong on Big Data

A goal is to use big data to pre-fill forms so customers don't have to answer any questions. But have you seen how unreliable the big data is?

Recently, I wrote about a startup called Aviva. (My comments were based on an article I read.) Aviva's CEO said, “What’s our long-term goal? To go from ask-it-once to ask-it-never — so customers don’t have to answer any questions at all.” How can coverage be booked without asking ANY questions? Why, using big data, of course. Wouldn’t a better goal be to first ask the necessary questions to assist consumers in identifying their unique exposures to loss, then match those exposures (where possible) with the proper insurance package to minimize the likelihood that a consumer will experience a serious or catastrophic financial loss? At my semi-annual checkups, my doctor asks me a lot of questions. Would it be an improvement if he didn’t ask me any questions? Maybe for his bottom line, but not for mine. Who can’t spare an hour once a year to prevent financial ruin? See also: Forget Big Data; You Need Fast Data   In another blog post, I wrote about the startup Slice, which apparently plans to write on-demand home-sharing and ride-sharing insurance without an application. How? Presumably by using big data, of course. In still another blog post, I wrote about Lemonade, which writes homeowners insurance using a phone app without a lot of pesky questions that are designed to identify exposure gaps of individuals and families. Lemonade, too, seems to be relying on black-box algorithms and our friend big data. Let’s take Slice. It claims: “All the information that insurance carriers ask you is all publicly available. So instead of taking up your time to give us this info, we use our clever SliceBots to collect it.” So, ALL of the information that Slice needs to properly insure all of your unique exposures to loss is publicly available? At one time, I saw a Zillow logo on a startup’s web site. Is that where, for example, homeowners' information might be obtained? Or might such a startup go directly to tax and other records where this information is obtained? How reliable is this “big data”? Is it vetted at all if customers are not asked any questions? Still another startup is Hippo. Backed by a number of investors, including Trulia, this is how Hippo's big data approach works, according to an article from Forbes: “According to the company, with Hippo, consumers can go from quote to purchase in minutes, as quotes are delivered in 60 seconds after answering three simple questions. Customers can get a personalized Hippo quote online, by phone or even through Facebook Messenger. The company leverages technology and data from multiple sources (such as property records, permit filings and aerial photography of roof conditions) to streamline the application process and provide ongoing risk monitoring. By leveraging data, Hippo saves customers time, while also garnering more accurate information that cannot be provided from subjective human answers alone. By cutting out the middleman, more accurately assessing risk and increasing technology efficiencies, Hippo is able to pass savings on to consumers.” There happens to be a home for sale in my neighborhood. Out of curiosity, I checked it out on both Zillow and Trulia. Zillow says it’s a 1-story home, Trulia says it has two stories. Zillow says two-and-a-half baths, Trulia says three-and-a-quarter baths. Zillow says the lot is 1.6 acres, Trulia says it's 0.48 acres. Zillow says the home is 2,968 sq. ft., Trulia says it’s 3,891 sq. ft. Just in the replacement cost valuation of the home alone, think these discrepancies might make a difference in coverage limits? See also: Healthcare Needs a Data Checkup   In my case, I owned a home that was 1,000 sq. ft. larger than the country tax records showed. Over the course of 30-plus years, attic space had been converted to living space, but the records from which “big data” might be drawn were never updated. When discussing this issue in an online forum, one of the participants said Zillow showed his home being 2,400 sq. ft. (the same size in the tax rolls), whereas it’s actually 4,683 sq. ft. Big data is one thing. Big, BAD data is another. Who is vetting the information, bots and algorithms? Certainly not regulators, given the open-arms welcome one startup got from a state insurance department. Is anyone listening? Does anyone care?

Bill Wilson

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Bill Wilson

William C. Wilson, Jr., CPCU, ARM, AIM, AAM is the founder of Insurance Commentary.com. He retired in December 2016 from the Independent Insurance Agents & Brokers of America, where he served as associate vice president of education and research.


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