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“Big Data” poses new risks

Recently, I watched the movie Moneyball about the use of statistical data by baseball’s Oakland A’s in order to determine the most effective players. Many of you  probably know the story of how the A’s became a powerhouse with a relatively small baseball payroll.  But the story is also one of the most well-known example s of “Big Data”, a term that is increasingly being used to describe the use of the mastery of large amounts of data, usually taken from the internet, in order to drive business tactics and strategies.

Steve Lohr’s recent article in The New York Times provides an in-depth look at the growing of the use of  this type of data, particularly from proprietary sources such as internet behemoths Google, Facebook, and LinkedIn, as well as government sources such as http://www.data.gov.

The applications to target advertising or investment, develop public health and safety applications, or to make economic predictions seem endless. Authors of WGA’s InsureBlog have written extensively about the dangers to businesses  that may arise from the theft or misuse of collected data.  However, the use of Big Data also presents interesting opportunities and poses pertinent questions for insurers and insurance regulators. For example, auto insurers might determine that Facebook users who “like” a winery or a brand of beer will be poorer risks and charge them more for insurance. Or perhaps insurers of Directors’ & Officers’ Liability Insurance for publicly-traded companies might start to make underwriting decisions about the tone of underlying internet comments, or “traffic”, that suggests challenges that have not been made public.  In turn, these potential underwriting applications could be misused by certain parties and therefore, subject to new regulation by state and federal insurance commissioners.

Clearly, “Big Data” is getting bigger every day. In fact, it just got bigger  when you clicked on this link and read this blog entry.  It’s no surprise then that the risks of its explosion are just starting to be understood.

About the Author

Phil Edmundson is the Chairman and CEO of William Gallagher Associates (WGA), insurance brokers and consultants for businesses with over 30 years in the insurance industry. He manages strategy, talent acquisition and development, and management / acquisitions at WGA.
617.646.0229 PEdmundson@wgains.com Connect with Phil on LinkedIn


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