Big data, risk classification, and privacy in insurance markets
Journal
The Geneva Risk and Insurance Review
ISSN
1554-964X
ISSN-Digital
1554-9658
Type
journal article
Date Issued
2024-03
Author(s)
Abstract
The development of new technologies and big data analytics tools has had a profound impact on the insurance industry. A new wave of insurance economics research has emerged to study the changes and challenges those big data analytics developments engendered on the insurance industry. We provide a comprehensive literature review on big data, risk classification, and privacy in insurance markets, and discuss avenues for future research. Our study is complemented by an application of the use of big data in risk classification, considering individuals' privacy preferences. We propose a framework for analyzing the trade-off between the accuracy of risk classification and the discount offered to policyholders as an incentive to share private data. Furthermore, we discuss the conditions under which using policyholders' private data to classify risks more accurately is profitable for an insurer. In particular, we find that improving the accuracy of risk classification, if achieved by requiring the use of private data, does not necessarily provide an incentive for insurers to create more granular risk classes.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Palgrave Macmillan
Volume
49
Number
1
Start page
75
End page
126
Official URL
Subject(s)
Division(s)
File(s)![Thumbnail Image]()
Name
Eling GRIR 2024 Big data.pdf
Size
2.17 MB
Format
Adobe PDF
Checksum (MD5)
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