Big data challenges to enterprise risk management

April 11, 2022 / 5 min read

Many companies collect and use large volumes of data to conduct business that are too large and complex for traditional storage and processing methods. Known as big data, this concept is particularly germane to the insurance and reinsurance industry, so much so that the National Association of Insurance Commissioners (NAIC) created an industry specific definition: “… big data refers to unstructured and/or structured data being used to influence underwriting, rating, pricing, forms, marketing and claims handling.”¹

A central data repository saves additional time by eliminating manual processes and enabling batch queries and analyses for enterprisewide risk management.

Big data is a key component to managing risk across an enterprise comprising billions of locations and thousands of treaties across multiple lines of business. The challenge many insurers and reinsurers are facing is how to store and process all that data so they can obtain a detailed view of their risk accumulations and extract meaningful insights that enable enterprisewide risk management.

Limitations to Using Big Data

Making informed business decisions without being able to compile, summarize, and understand all this complex data is difficult, to say the least. Not knowing what your entire portfolio comprises, for example, makes it virtually impossible to truly understand the potential impacts of major catastrophic events. It is also hard to know if your company is satisfying its risk appetite and operating within its desired risk tolerances without knowing more about the entirety of your business. Even ensuring your organizations’ ongoing solvency can be challenging if you don’t fully understand your enterprisewide risk profile.

Even when these complex data are compiled, many insurers and reinsurers face hurdles to leveraging it for enterprise risk management. The storage and computing power required for big data can be expensive, and a large amount of time and resources are needed for management and upkeep of both the data and the physical components, such as servers and networks. These steep costs in money, time, resources, and people can hurt a company’s bottom line and profitability.

Centralize Big Data in the Cloud

If, instead, companies store their mountains of complex data in a central repository that is housed in the cloud, as is available with Verisk’s Enterprise Exposure Manager, a new world of possibilities appears. For one, accessing the data becomes possible from almost anywhere at any time, enabling analyses whenever and wherever they are needed. This could help save time and resources in a variety of ways, from real-time event response, to underwriting, to claims assessment and adjustment. It also allows multiple users to access data simultaneously, enabling multiple people to work on a project or process involving those data at the same time.

A cloud-based environment with high-performance computing technologies can also provide more speed so you can analyze these large volumes of data quickly and efficiently—a critical component for assessing the potential impact of extreme events as they occur. Faster analyses can also help uncover actionable insights sooner to inform business decisions and gain a competitive advantage.

A central data repository saves additional time by helping to eliminate manual processes and enabling batch queries and analyses for enterprisewide risk management. It is also much easier to resolve differing data sets that may currently be stored across multiple locations, which is particularly important for insurance and reinsurance companies given the impact data quality can have on core business functions such as pricing and rating.

Moving to a cloud-native solution also helps avoid infrastructure limitations like digital and physical space and computing power, which can also help decrease long-term costs by reducing upkeep of your own servers and the associated space and people required for it. Because most cloud environments have a high level of cyber security measures and protocols, moving to a cloud-based solution like Verisk’s Enterprise Exposure Manager also enhances your data security—something that has become increasingly necessary in light of various regulatory and legal requirements.

The scalability offered by the cloud is especially useful for global insurance and reinsurance portfolios. As these portfolios continue to grow, companies expand into new lines of business or regions, and additional exposure data is acquired, storage space and computing power can be spun up dynamically on the cloud to address your organization’s needs.

Managing Enterprise Risk with Big Data

The ability to store, manage, and analyze big data is crucial for the future of the insurance and reinsurance industry. A centralized data repository in a cloud-native solution is an optimal approach for enterprise risk management. It enables the evaluation of enterprisewide risk across billions of locations to help companies better understand global exposures and portfolio-wide risk accumulations, manage and analyze impacts of extreme events as they occur, perform marginal impact analyses, and interpret portfolio changes.

Enterprise Exposure Manager provides these critical functions and goes even further to help facilitate your global risk management process by applying insurance and treaty financial terms to deliver a net view. These capabilities can be particularly useful as an extreme event is unfolding and time is of the essence; integrations with Verisk’s exposure management tools, real-time event analytics and loss estimates, and real-time portfolio and reinsurance contract analysis capabilities can help you assess your risk quickly so you can make critical business decisions, such as determining if your reinsurance is adequate or where to deploy claims resources. Enterprise Exposure Manager can be the answer to leveraging and managing big data for your company, offering a new way to approach enterprise-level decision-making.

Learn more about Verisk's Enterprise Exposure Manager.

https://content.naic.org/cipr-topics/big-data