1. Big Data and Regulation in the Insurance Industry
Lars Powell, PhD
Executive Director
Alabama Center for Insurance Information and Research
University of Alabama

2. Benefits of Big Data applications

3. Benefits of Big Data applications
Accurate prices
Efficient risk-taking
Telematics
New rating variables

4. Benefits of Big Data applications
Customer satisfaction
Real-time monitoring
Appropriate products

5. Benefits of Big Data applications
Increasing coverage
Cat models
Satellite data
Granular underwriting and rates

6. Benefits of Big Data applications
Claims process
Reducing fraud
Link analysis, text analysis
Improving accuracy
Improving customer satisfaction

7. Benefits of Big Data applications
Increasing efficiency
Reducing search costs for consumers
Reducing operating costs for insurers

9. Issues Substantial changes to regulation of insurance products
Disclosure
Price segmentation
Disparate impact
Regulatory resources

10. Disclosure A noble goal Can reduce efficacy of rating variables
 Less accurate rates
Probably a losing argument

11. Price segmentation Accurate prices Optimal incentives
Competitive markets
Does not reduce ability to pool risk
Not feasible for premiums to be “too accurate”

12. Disparate Impact
Accurate pricing only has disparate impact on high-risk policyholders

13. Regulatory resources Model complexity Advanced statistical methods
Opacity vs. transparency
State vs. Federal regulation?

14. Insurance markets work very well

15. Complaints by Category and Premium

17. Competition Measures
Source: NAIC 2014 Competition Database Report

18. Average Annual Return on Net Worth by Industry: 2006 – 2015
Sources: ISO®, a Verisk business® and Fortune, as reported by Insurance Information Institute at:

19. Thank you