As far back as ancient Greece, businesses have looked to numerous forms of data to calculate risk. Ancient money lenders and their insurers would examine a variety of factors – like the time of year, the number of clouds in the sky, or the entrails of a sacrificed pig – in order to read the future and calculate the risk of losing a ship to thieves or even the probability of a natural disaster occurring. Thankfully, the methods of determining risks have progressed significantly since then.
Companies are now increasingly looking at data collected from non-traditional sources, like social media, to determine the creditworthiness and potential investment risk of modern companies. Though online data – such as the number of employees listed on LinkedIn – could easily slip under the radar to many, a sudden rise or fall in reported employee numbers can give a real-time indication of financial issues at a given company well before an official announcement is made.
Publicly available online data – including information on funding rounds or recent appointments – can be collected from websites such as Crunchbase. This information can provide an up-to-the-minute (and free) early warning system about the financial future of companies. This data has the potential to give investors the insights they need to remain competitive in an environment where risk premiums are harder to calculate than ever – especially as COVID-19 continues to fundamentally disrupt the business models of companies worldwide.
How publicly available online data offers a different approach to fraud prevention
All industries face, these days, significant pressure daily to make – and keep – money. But for some industries, like insurance, the added complication of the pandemic’s impact can be overwhelming. In the United States, professional services network Deloitte has issued warnings that the impacts of COVID-19 will be felt for months, if not years, to come across a broad variety of insurance specialties. The impacts range from disrupted investments, finance and capital, underwriting, claims, and actuarial functions due to catalytic events ranging from the closure of nonessential businesses to changes in state and federal regulations.
But with the large insurance pay-outs caused by COVID-19, insurance companies anticipate a pronounced spike in fraud attempts, as difficult economic circumstances tempt businesses to try their luck. The Internal Revenue Service, the Federal Trade Commission, and the Social Security Administration have all issued warnings to be aware of fraudsters trying to take advantage of consumers and businesses during the pandemic. Insurance companies that have furloughed or laid off employees as a result of the pandemic, may struggle to process these claims in a timely manner.
By using automated online data collection solutions, insurers can verify these claims faster. Freely available online data can be a useful tool when it comes to checking on their validity. Online data can help to identify if a claimant’s online profile is at odds with the claim presented. However, large enterprises are constantly generating relevant details, all of which needs to be cross-referenced and analyzed as part of the assessment. Details like stock prices and employees fluctuate constantly, making it nearly impossible for insurers to keep track of these large-scale details manually. This makes an automated data collection solution that gathers data according to defined requirements in real-time even more necessary.
By employing an automated data collection solution, insurers will have real-time indications when something is wrong. This is an example of how publicly available online data can stop fraud in its tracks while allowing multiple legitimate claims to be paid faster. When insurance companies are no longer bleeding money to fraudulent claims, they’ll have more resources for honest businesses whose finances (and employee wellbeing) are under significant threat.
How online data collection can improve insurance underwriting
Without the best tools on hand, collecting all the available online data needed to verify claims can be not only difficult but also immensely time-consuming. Automated online data collection enables insurers to collect more data than if purely traditional means were utilized. It also speeds up the process for claimants who would no longer need to manually fill out endless forms to provide the requisite information. More online data means better risk assessment, which leads to smarter pricing, increased gross margins, and a fundamentally improved underwriting process. It can also make for a much faster onboarding process for new customers, allowing for the insurance company to increase its customer base at a faster rate.
For example, if an insurer wants to ascertain if a struggling hotel chain is creditworthy, automatic data collection solutions can be utilized to scrape public or open data from a number of websites (including 3rd parties like Booking.com) to see how many rooms are available, and the price they are charging in key locations. This data can give a more realistic assessment of how well the hotel chain is performing financially, which might not be as evident in traditional forms and based on traditional data means. As insurers can receive these types of updates in real-time (alongside other relevant data like corporate news or stock prices) this represents a superior option to slower-moving avenues. After all, the current occupancy rate is a much better indicator of revenue than more formal financial reports that may be from several weeks or even months ago when the economic picture was much different than it is now due to the fast-paced market changes we’re facing now.
As the economic consequences of the pandemic will almost certainly lead to more sudden spikes in insurance claims, having as much of the data collection process automated and real-time as possible gives businesses the infrastructure necessary to rapidly scale to handle the number of claims they will be inundated with.
What is the right approach to online data collection?
Collecting massive amounts of data at true scale can be arduous if you do not have the right tools and the right operation in place. These challenges can be easily solved with the right data collection set-up. In our competitive market reality, many websites block any activity which seems like it could originate from competitors trying to collect large amounts of data, or that could indicate malicious activity such as botnets. The information available to typical consumers (a.k.a. the general public) is not the same as is the data that’s available to businesses. Therefore, it’s best for businesses to use some form of a data collection network based on residential IP addresses knowingly contributed by global consumers, as this will allow the data to appear as a typical consumer would when collecting online data. By using these types of networks, they can run scenarios that mimic real-time users – like an android user in Thailand or an iPhone user in California – and effectively collect data in any part of the world without restriction.
The new set of challenges brought by the pandemic for the insurance industry should lead them to embrace a new set of technological solutions. If the industry wants to be able to adequately protect itself and come out on the other end of the barrage of new claims 2021 could bring, they need to have the wealth of data necessary to process them quickly and accurately. Taking an open-minded and efficient approach to the type of data that they use will be a big part of this, and embracing publicly available online data will be a key element of the transition to a more modern and efficient approach to data-driven insurance.